SINGAPORE, March 21 (Reuters) - Gold prices edged higher on
Wednesday after dropping nearly 1 percent in the previous
session, as a slightly weaker dollar came to the aid of buyers,
while sluggish physical demand and an improving U.S. economic
outlook capped gains.	
    The latest U.S. housing market data added to a string of
numbers indicating steady recovery in the world's largest
economy, diminishing hopes of further quantitative easing which
had helped buoy gold earlier this year. 	
    The dollar edged down 0.3 percent against a basket of
currencies. A cheaper greenback makes dollar-priced commodities,
including gold, more attractive to buyers holding other
currencies. 	
    Spot gold edged up 0.3 percent to $1,655.14 an ounce
by 0241 GMT. U.S. gold gained half a percent to
$1,655.40.	
    Some investors have taken money out of gold after a recent
equities rally, and turned to chase higher-yielding assets with
indications of a stabilising global economy taking the shine off
safe-haven assets such as gold and government bonds.	
    "Gold has seen some liquidation by funds after the hopes for
QE3 (third round of quantitative easing) were dashed," said
Peter Fung, head of dealing at Wing Fung Precious Metals in Hong
Kong.	
    Gold found good support at the $1,640 level in the previous
session, but in the short-term prices could test $1,620-$1,630
level due to a generally stronger dollar and lack of support
from the physical market, Fung added. The dollar index is up
about 0.8 percent so far this month.	
    Technical analysis suggested that spot gold would remain
neutral in the range of $1,634 and $1,671, Reuters market
analyst Wang Tao said. 	
    	
	
    SLOW PHYSICAL MARKET	
    Dealers in Singapore also reported slow physical market
activity after prices rebounded above $1,650 an ounce.	
    "Buying is over and now clients are just waiting to take
physical deliveries," said a Singapore-based trader, noting that
Indonesia and Thailand were among the most active buyers.	
    Investors are closely watching the U.S. debt market, an
indicator of appetite for the safe-haven asset. 	
    On Tuesday, U.S. Treasury debt prices posted modest gains,
though selling still pushed some yields to multi-month highs as
traders focused on the idea that a stronger economy could mean
quicker inflation and monetary policy tightening sooner than
expected. 	
    High oil prices have helped underpin gold sentiment. But oil
tumbled in the previous session after comments from Saudi Arabia
on its willingness to meet any supply gap. 	
    SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings had slipped 0.23 percent
to 1,290.247 tonnes by March 20, the first drop after staying
unchanged for four straight sessions. 	
    Spot silver rebounded from a 2.3-percent slide in the
previous session and was trading up 0.5 percent to $32.26.

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