Gold fell back in Asian and early London trade on Tuesday, undoing Monday's 1.1% gain as crude oil fell, stock markets were mixed, and government bonds ticked higher after the worst two weeks for US Treasuries since 1982.

"Everybody is waiting for the Fed," notes Ronald Leung of Lee Cheong Gold Dealers in Hong Kong. "I think gold has to stay above these levels before it can charge higher again.

"The range is still the same at between $880 to $900 for today and tomorrow."

Gold Prices slipped to a two-day low of $886 per ounce at the AM Fix in London today.

After slashing the cost of borrowing Dollars to almost minus 2.0% in real terms (after accounting for inflation), the Federal Reserve is expected to signal a pause after cutting another 0.25% off its key target rate on Wednesday.

"It's really a question of whether we are getting [enough] bang for the buck," said Dallas Fed president Richard Fisher – a dissenting voice at the last two Fed meetings – a week ago today.

"Clearly we're not. The system is sputtering."

But Bloomberg claims today that Fed chairman Ben Bernanke "is persuading investors that the financial markets are working again."

The newswire cites as evidence the 8.4% rally in the S&P stock index since the Bear Stearns rescue, plus last month's record sale of $45.3 billion in US corporate debt.

"In the near term, if [Bernanke] is a triage nurse, you have to say he's definitely stabilized the patient," says James Swanson, chief investment strategist of the $204bn funds at MFS Investment Management in Boston.

"That's what I'd call it, a triage nurse using radical procedures. But they worked. Whether they'll be proven right in the long run, I don't know."

The Fed's most radical remedy to date – the $29bn underwriting of J.P.Morgan's takeover of Bear Stearns in March – marks "the worst policy mistake in a generation," according to a former head of Fed monetary affairs.

Speaking at the American Enterprise Institute on Monday, Vincent Reinhart, who left the US central bank late in 2007, compared the current banking crisis – and the Fed's response – to both "the great contraction" of the 1930s' Great Depression and also "the great inflation" of the 1970s.

Back in the Gold Market, traders are "looking for further direction from the Fed meeting," said Gnanasekar Thiagarajan, at Commtrendz in Mumbai to the Economic Times of India today.

"Gold is not likely to make any significant moves before that."

But today's Nature Day holiday in Japan – followed by the looming May Day shutdown across continental Europe and Russia on Thursday – looks set to make for thin trade either side of the Fed's much-awaited decision.

"With technically neutral charts for the precious metals," adds Mitsui, the precious metals dealer, "it is difficult to see where the next move will come from."

"I think falling oil prices [have] triggered some selling," one Hong Kong Gold Dealer told Reuters this morning.

"We might see support at $880 level.

Crude oil dropped more than 1% to $117.85 per barrel Tuesday morning as the strike at Scotland's Grangemouth refinery ended. A strike by senior staff in Nigeria continued to block production of 860,000 barrels per day for Exxon Mobil.

"People [also] started to Sell Gold because of a weakening Euro," the Hong Kong dealer went on. "The physical market is deserted after we saw pretty good demand from Southeast Asia yesterday."

The European single currency today sank to its lowest level since 4th April below $1.5540 after German and Euro-wide retail sentiment both showed a marked decline on the monthly Bloomberg purchasing managers' index.

That move kept the Gold Price in Euros in a tight range around €569 per ounce as the broad FTSE Eurofirst index of 300 blue-chip equities slipped 0.5%.

Germany's largest bank, Deutsche, today reported its first quarterly loss in five years on credit-related write-downs of €2.7 billion ($4.2bn) in what the CEO, Josef Ackermann, called "the most difficult [market] in recent memory."

Across the world in Toyko, Daiwa Securities also booked its first quarterly loss in five years, losing $123.8 million in the first three months of this year thanks to credit-related losses.

Daiwa made $250m profit over the same period last year.

For British investors wanting to Buy Gold today, the price bounced to £449.50 per ounce from a two-day low of £446.15 as the Pound sank on news that UK mortgage approvals fell to the lowest number on record in March.

The Pound Sterling dropped 1.5¢ to $1.9730 after the Bank of England said the number of mortgages approved by UK banks last month fell 45% from March 2007.

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