* Gold still trading near 2-year lows
* China demand remains strong-trader
* Coming Up: Fed Chairman Bernanke speaks at 1400 GMT
(Adds quotes, updates prices)
By A. Ananthalakshmi
SINGAPORE, May 22 (Reuters) - Gold edged higher on Wednesday
due to strong Chinese demand and after Federal Reserve officials
allayed investor concerns that the U.S. central bank will soon
exit its bullion-friendly bond purchases.
Gold has been pressured in recent weeks by fears the Fed
could scale back or halt its monthly $85 billion bond purchases
that have buoyed bullion's appeal as a hedge against inflation.
The metal had fallen for eight sessions out of the last nine
as of Tuesday and is down nearly 18 percent for the year.
Spot gold rose 0.2 percent to $1,377.7 an ounce by
0314 GMT, but remains not far off a two-year low of $1,321.35
reached during a sell-off last month.
Spot silver gained 0.5 percent to $22.49 an ounce,
regaining more ground after dropping to 2-1/2-year lows earlier
"Chinese buying is mainly pushing up gold prices," said a
trader in Tokyo, adding that bullion could go up to $1,385.
Shanghai gold prices fell slightly on Wednesday but
were still more than $30 higher than spot gold, indicating that
demand in China - the world's No. 2 consumer after India - was
strong because it would be cheaper for Chinese buyers to
purchase gold from overseas.
U.S. gold was little changed at $1,376.4 an ounce.
Investors are eyeing Fed Chairman Ben Bernanke's testimony
in Congress about the state of the U.S. economy later in the day
for clues to his stance on ending the monetary stimulus this
year. The Federal Open Market Committee also releases the
minutes of its April 30-May 1 meeting on Wednesday.
New York Fed President William Dudley and St. Louis Fed
chief James Bullard, who will both vote at the central bank's
next scheduled meeting on June 18-19, made clear further
economic progress was needed before they would support
curtailing bond purchases.
Some officials are calling for an early end to the monetary
easing given recent gains in the U.S. jobs sector.
"We would suggest that Bernanke will hint at some sort of
pullback, in which case, we could see a pickup in volatility and
lower gold prices heading into the balance of the week," said
Edward Meir, a metals analyst at brokerage INTL FCStone.
Persistent outflows from exchange-traded funds as well as
technical charts suggest gold may have more downside pressure.
Holdings of the largest gold-backed exchange-traded-fund, New
York's SPDR Gold Trust, fell 0.8 percent on Tuesday to
1,023.08 tonnes, the lowest in more than four years.
Precious metals prices 0314 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1377.70 2.26 +0.16 -17.73
Spot Silver 22.49 0.11 +0.49 -25.73
Spot Platinum 1461.74 4.74 +0.33 -4.77
Spot Palladium 745.22 1.72 +0.23 7.69
COMEX GOLD JUN3 1376.40 -1.20 -0.09 -17.87 10687
COMEX SILVER JUL3 22.49 0.03 +0.13 -25.62 2559
COMEX gold and silver contracts show the most active months
(Editing by Manolo Serapio Jr. and Muralikumar Anantharaman)