* Silver rises to over 7-year high
* China H1 gold consumption down 38% y/y -association
* Fed's two-day policy meeting ends on Wednesday (Updates prices)
By Brijesh Patel
July 28 (Reuters) - Gold gave up gains on Tuesday after scaling record highs as the dollar regained some ground, although simmering U.S.-China tensions and bets that the U.S. Federal Reserve would maintain its dovish policy stance kept demand solid for the metal.
Spot gold XAU= was steady at $1,941.23 per ounce by 0707 GMT, but off its peak of $1,980.57 hit earlier, with the retreat also attributed to profit-taking. U.S. gold futures GCcv1 rose 0.2% to $1,935.10.
Silver XAG= dropped 0.7% after rising as much as 6.4% to $26.19 per ounce, its highest since April 2013.
"A slight reversal in the dollar could have triggered nervous longs to bail out, but there's been no change in the fundamentals whatsoever," said Michael McCarthy, chief strategist at CMC Markets.
"We've had a very steep rise over the previous eight sessions from $1,800 to all the way up to $1,980, and such a rise in any market in such a short period of time does make it vulnerable to pullback."
The dollar index .DXY crept higher after slumping to a two-year low, with markets awaiting the passage of a new fiscal rescue package in the United States. USD/ also took stock of association data showing gold consumption from traditional top buyer China fell 38.25% in the first half of the year. focus now shifts to the Fed's two-day meeting that ends on Wednesday.
"(This meeting) is expected to discuss implementing dovish forward guidance which gold investors would consider supportive as real yields, the key driver of gold, would be expected to remain at record lows," Phillip Futures analysts said in a note. bond yields reduce the opportunity cost of holding non-interest bearing gold.
Deteriorating U.S.-China ties and dimming hopes of a quick economic recovery as the virus showed no signs of slowing kept demand solid for the safe-haven metal, which has risen nearly 28% so far this year. XPT= lost 1.6% to $930.32 and palladium XPD= dropped 1.7% to $2,270.24.