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PRECIOUS-Gold drops to 2-week low after Fed rate outlook lifts dollar

Aug 1 (Reuters) - Gold prices slipped to a two-week low on Thursday after the U.S. Federal Reserve delivered a 25-basis-point rate cut as expected but ruled out a lengthy easing cycle, sending the dollar to a two-year peak.

FUNDAMENTALS

* Spot gold was down 0.4% at $1,407.91 per ounce as of 0102 GMT, after falling to its lowest since July 17 at $1,405.50.

* U.S. gold futures dropped 1.3% to $1,419 an ounce.

* Policymakers moved the U.S. central bank's benchmark overnight lending rate to a target range of 2.00% to 2.25%, citing concerns about the global economy and muted U.S. inflation.

* However, Fed Chair Jerome Powell, speaking in a news conference after the release of the central bank's statement, characterised Wednesday's rate cut as "a mid-cycle adjustment to policy", a sign to markets that further sharp cuts were not imminent.

* The dollar index jumped to a two-year high after Powell signaled the move was not the start of a rate-cutting cycle.

* U.S. Treasuries reacted to Powell's remarks by flattening the yield curve as the front-end of the market scaled back on prior expectations for at least a 100 basis points of easing in the near-term.

* Asian shares fell to six-week lows on Thursday.

* U.S. and Chinese negotiators ended a brief round of trade talks on Wednesday with little sign of progress and agreed to meet again in September, prolonging an uneasy truce in a year-long trade war between the world's two largest economies.

* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.18% to 823.42 tonnes on Wednesday from 824.89 tonnes on Tuesday.

* The U.S. Mint sold 5,500 ounces of American Eagle gold coins in July, up 10% from the previous month, according to the latest data.

DATA AHEAD(GMT)

* 0145 China Caixin Mfg PMI Final July

* 1100 UK BOE Bank Rate Aug

* 1230 US Initial Jobless Claims Weekly

* 1345 US Markit Mfg PMI Final July

* 1400 US ISM Manufacturing PMI July (Reporting by Brijesh Patel in Bengaluru; editing by Richard Pullin)