By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold fell for a second session on Thursday after minutes from a Federal Reserve policy meeting failed to ease fears the U.S. central bank would begin tapering its economic stimulus from next month.
The minutes of the Fed's July 30-31 meeting, released on Wednesday, showed that a few officials thought last month it would soon be time to slow the pace of their bond buying "somewhat" but others counseled patience.
Gold, often bought as a hedge against inflation, initially gained on the minutes due to the lack of consensus, but turned negative after U.S. Treasury yields and the dollar rose.
"I don't think the Fed minutes gave away too much," said Victor Thianpiriya, an analyst at ANZ in Singapore. "Not too much has changed (on the outlook for stimulus). But the reaction in Treasury yields and the dollar is impacting gold."
Spot gold had declined 0.2 percent to $1,362.79 an ounce by 0332 GMT, after falling 0.3 percent the day before. U.S. gold dropped about $7 to $1,362.70.
Traders said prices could see more downside if they fall below $1,355 an ounce, with support near $1,345.
Ten-year U.S. Treasury yields jumped to 2.92 percent, a level last seen in July 2011, as markets interpreted the minutes to mean the Fed did not completely rule out a scale back from next month. The U.S. dollar also edged higher.
In June, Fed Chairman Ben Bernanke said the bank expected to trim stimulus later this year and to halt it by mid-2014. Investors widely believe that the tapering would begin in September on the back of improvements in the labour market.
Any scale back of the $85 billion monthly bond purchases by the Fed would weaken support for gold, which had hit a record high in 2011 due to easy central bank money.
Gold is down nearly 20 percent for the year, but has gained about 15 percent since hitting a three-year low of $1,180.71 in late June.
"Most of the gains are due to short-covering and are not based on fundamentals," said ANZ's Thianpiriya. "We are due for a healthy downward correction."
ANZ has forecast gold prices to hit $1,380 by the end of the year on strong demand from China and a reversal of big outflows from gold-backed exchange-traded funds.
(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)
