Gold slipped on Tuesday after four days of gains but was holding near three-week highs on hopes that physical buyers and investors will return to the market.

The metal has gained over 4 per cent in the last four sessions through Monday on dollar weakness and a surprise rise in holdings of gold exchange-traded funds (ETFs).

"The sentiment in gold has definitely improved recently," said Danny Laidler, head of ETF Securities' Australia and New Zealand business.

"The massive redemptions we saw in April have reduced every month. Hopefully the large outflows have stopped."

Spot gold eased 0.1 per cent to $1,334.24 an ounce by 0340 GMT, not far from a three-week high of $1,343.06. Silver  also slipped after gaining nearly 4 per cent on Monday.

Gold rose nearly 2 per cent in the previous session on strong Chinese gold consumption and an inflow to SPDR Gold Trust, the world's biggest gold ETF.

The top eight gold ETFs tracked by Reuters have recorded outflows of about $26 billion so far this year, hurting gold prices. A reversal in the trend will aid a price recovery.

China's gold consumption surged in the first six months of the year as sliding prices of the metal lured buyers, data showed on Monday, reinforcing expectations that the nation will overtake India as the world's top gold consumer this year.
 
Gold has fallen about 20 per cent this year amid expectations the US Federal Reserve will start to scale back its economic stimulus, which has supported gold's role as a hedge against inflation.

"Gold prices have been supported lately despite continuing talks of Fed cutting back on stimulus in September. The main reason being the strong physical market in China," Phillip Futures analyst Joyce Liu said.

With key US economic data due this week, the focus could shift back to the timing of any pull-back in the Fed's stimulus.

However, some experts say even if the bank begins tapering this year the impact will be fairly limited.

"The expectations of a QE tapering are already priced in," said ETF Securities' Laidler, referring to quantitative easing. "There will not be a massive downside when the tapering begins." - Reuters