Gold edged up on Wednesday on bargain hunting driven by a drop in stock markets and after the U.S. Federal Reserve said it would keep interest rates low, but a lack of physical buying could cap gains.

The dollar slipped toward a 15-year low against the yen after the Fed took steps to bolster the fragile U.S. recovery, while Asian stocks tracked losses in Wall Street and were also dragged down by tech sales.

Spot gold added $1.30 an ounce to $1,203.15 an ounce by 0322 GMT, still below a 3-week high of $1,212.61 hit last week and the 50-day moving average at $1,209.60.

The metal ignored a flurry of data from China, which showed that investment and factory output slowed further last month as Beijing steered credit growth back to normal after a record lending spree in 2009.

There's a bit of short covering and people are happy to buy a little bit because the Fed's policy is unchanged. But I don't see much interest from jewelers. They did make inquiries at below $1,200, said a dealer in Hong Kong.

I don't think gold is reacting to Chinese data. At least they will not increase the interest rates. Sentiment for gold is slightly bullish because of the Fed but I think the upside is capped at around $1,210.

Most U.S. economists now expect the Fed to leave interest rates on hold near zero through at least the middle of next year in an effort to prop up the economy, a Reuters poll found on Tuesday.

U.S. gold futures for December delivery rose $7.4 to $1,205.4 an ounce.

While physical buyers would be happy to buy on dips, gold hovering around $1,200 scared off consumers from China, which said last week it would allow more banks to import and export bullion due to growing domestic demand.

Recently, we saw a little bit of physical buying. It's not that much, honestly, said Ellison Chu, manager of precious metals at Standard Bank Asia in Hong Kong.

Silver was steady, while platinum group metals bounced from lows.

Tokyo dealers noted light buying from the auto sector for palladium but the physical market in Japan lacked activity because of the traditional Obon summer holiday this week.

General Motors Co GM.UL is preparing to report second-quarter results that will show a substantial gain over the first quarter in a report it will use to bolster its bid to return to capital markets and pay back taxpayers, two people familiar with the matter said.

(Editing by Michael Urquhart)