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Gold held a two-day drop as investors cut wagers on a bullion rally and reduced assets in exchange-traded products backed by the metal.

Bullion for immediate delivery rose 0.2 percent to $1,339.05 an ounce at 11:42 a.m. in Singapore, according to Bloomberg generic pricing. The metal lost 0.8 percent in the previous two sessions to pare this year’s advance to 26 percent.

After stunning gains to start the year, bullion’s beginning to lose its momentum. Prices have dropped about 1 percent in August as the U.S. economy picks up steam, damping demand for a haven. As interest in equity markets took off, with three U.S. stock benchmarks grinding to fresh highs last week, hedge funds and other speculators cut their bets on a bullion rally for the fourth time in five weeks.

The net-long position in gold futures and options fell 4.3 percent to 255,773 contracts in the week ended Aug. 9, according to Commodity Futures Trading Commission data released three days later. The holdings have dropped 11 percent since July 5, when they reached an all-time high of 286,921.

Gold imports more than halved to $4.97 billion in the first four months of the current fiscal, which is expected to keep a lid on the current account deficit.

The sliding prices of the precious metal in both global and domestic markets are seen as a contributory factor for the 52.5 per cent decline.

Gold imports stood at $ 10.47 billion in April-July of 2015.

The in-bound shipments contracted for the sixth consecutive month in July by 63.65 per cent to $1.07 billion, according to Commerce Ministry data.

The contraction in imports helped narrow trade deficit to $7.76 billion last month as against $13 billion in July 2015.

"The U.S. macro data is very mixed and expectations of a rate hike are already priced in gold," said Helen Lau, analyst at Argonaut Securities in Hong Kong. "The gold supply is coming back, but overall demand is not good. From now, we need more catalyst to drive the investment demand higher in order to offset the supply increase from gold miners."

Reference: Bloomberg, Economic Times