Gold edged between gains and losses on Wednesday as investors fretted over the timing of the US Federal Reserve's stimulus tapering.

The choppy trade followed a 1 per cent fall on Tuesday, which ended a four-day winning streak. The drop was caused by strong US economic data and further import curbs in top buyer India.

Uncertainty over when the Fed would begin scaling back its massive bond purchases has pushed gold down more than 20 per cent this year after 12 annual gains.  

"What would be extremely welcome is some clarity," said analyst Dominic Schnider of UBS Wealth Management in Singapore.

"And I think September would be the ideal time to provide clarity. Some market expectations are shifting towards a December tapering."

The US economic performance remains too mixed for Fed policymakers to lay out a detailed path for reducing and eventually halting their asset-purchasing next month, Atlanta Fed President Dennis Lockhart said on Tuesday.

But he appeared open to at least a modest pullback in monetary stimulus from its current pace of $85 billion per month.

"Once the taper is out, it will hit gold once more," said Schnider, though likely not to the same extent as drops earlier this year.  

Spot gold inched up 0.06 per cent to $1,321.42 an ounce by 0304 GMT.

The next Fed meeting is scheduled for September 17 to18. Until then, markets will scrutinise data to gauge the strength of economic recovery.

US retail sales rose in July, data showed on Tuesday, pointing to an acceleration in consumer spending that could bolster the case for a Fed tapering.

INDIA CURBS

India hiked the import duty on gold yet again on Tuesday to a record 10 per cent and also raised excise duty on the metal, after imports jumped in July despite attempts to strangle supply and curb demand as the government tries to rein in dollar spending.

Gold prices in India are likely to rise this week, extending gains past their highest level in four months, due to the import duty hike and dollar weakness.

"Despite the expectations that gold imports may fall, India's appetite for bullion is anticipated to pick-up later in the year due to seasonal demand," HSBC analysts wrote in a note.

Analysts say this could increase further illegal gold supply into India. - Reuters