SINGAPORE (Reuters) - Gold edged down on Wednesday after hitting a two-week high in the previous session as upbeat U.S. manufacturing data soothed worries about the economy and dampened hopes of further monetary easing.
Spot gold edged down 0.4 percent to $1,654.89 an ounce by 02:14 a.m. EDT (0614) GMT, after rising to $1,671.20 in on Tuesday.
U.S. gold also lost 0.4 percent to $1,656.
After a recent run of weak data, the Institute for Supply Management said that U.S. manufacturing grew in April at the fastest pace in 10 months, easing concerns the world's largest economy had lost momentum at the start of the second quarter.
Stronger economic growth will lessen the need for the U.S. Federal Reserve to further ease monetary policy, and dent investor appetite in bullion which benefits from low real interest rates.
Investors are shifting their focus to the U.S. non-farm payrolls data due Friday, and closely watching the European Central Bank rate decision Thursday as well as weekend elections in France and Greece.
"Gold will probably be sitting in limbo for a few more days," said Nick Trevethan, senior metals strategist at ANZ in Singapore, "It is rather inversely sensitive to positive numbers, as evidenced by the ISM number overnight."
He added that the weaker Australian dollar as a result of a surprise rate cut by the Reserve Bank of Australia on Tuesday triggered some selling by producers, as gold in Aussie dollar terms rose to a three-week high.
SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, said its holdings fell for a second straight day to a three-month low of 1,274.09 tonnes by May 1.
"Investors are standing on the sidelines of the market, waiting for the uncertainty around the U.S. economy, the euro zone and QE3 (third round of quantitative easing by the Fed) to clear up," said a Hong Kong-based dealer.
Holdings in the iShares Silver Trust, the world's biggest silver ETF, were stagnant, unchanged since April 20 at 9,552.14 tonnes by May 1.
Spot silver fell 0.3 percent to $30.84 an ounce.
Editing by Miral Fahmy