UPDATE 3-Gold regains strength, bides time ahead of Fed

(Adds closing in Tokyo)

By Lewa Pardomuan

SINGAPORE, Dec 10 (Reuters) - Gold bounced on bargain
hunting on Monday after a drop of around 1 percent last week,
but the metal was likely to trade in a tight range ahead of a
decision by the U.S. Federal Reserve on interest rates.

Spot gold XAU= rose to $798.00/798.80 an ounce from
$794.90/795.70 late in New York on Friday, when it fell more
than $8 an ounce on the back of weaker crude oil.

Gold has been stuck in a tight range in recent days ahead
of the Fed rate decision on Tuesday, and some investors were
cautious after data showing steady U.S. job growth cooled
expectations of a large cut in key interest rates.

"Gold is consolidating within the range of $785 to $805.
Market participants are just waiting for the rate rate cut
announcement before taking any actions," said William Kwan, a
dealer at Phillip Futures in Singapore.

"When the payroll is better, they may not cut so
aggressively. However any rate cut will be good for the
precious market. It will add excess liquidity," he said.

In another volatile day of trading, dealers noted bargain
hunting around Monday's low around $793 an ounce which pushed
up the price to above $799.

But profit taking was also seen at higher levels, with
physical dealers in Singapore expecting sales of gold scraps
from Indonesia, Southeast Asia's largest consumer.

The Fed is seen cutting its target for overnight rates by
at least a quarter-point to 4.25 percent this week, but
interest rate futures have cut the implied chance of a
half-point cut to about 25 percent from near 60 percent last
week FEDWATCH.

Friday's November payrolls data showed a 94,000 increase in
employment and the jobless rate holding at 4.7 percent,
suggesting the economy was not falling off a cliff.

The euro was steady at $1.4656 EUR=, hovering above a
three-week low of $1.4525 hit last week.

"As long as gold manages to sustain above $790, buying
could creep in on all dips, preventing a major slide. However,
it needs to clear $810 for the rally to sustain," said Pradeep
Unni, an analyst at Vision Commodities in Dubai.

"Immediate resistance is around $808 and $815," he said.

U.S. bank JPMorgan said on Friday precious metals could
rally in 2008 as the U.S. dollar falls and supply flattens,
ranking the sector the strongest among all commodities for next
year. [ID:nN07447941]

Expectations of further rate cuts in December, record-high
crude oil and uncertainty in the U.S. credit market propelled
gold to above $845 last month -- a whisker away from the record
peak of $850 hit in 1980.

But trading has been volatile since, with investors keen to
book profits ahead of the year-end and declines in oil ignited
selling from speculators. Gold tumbled to $777 an ounce -- the
lowest since Nov. 20 -- in early December.

U.S. crude futures CLc1 extended last week's losses,
hovering around $87 a barrel on Monday, on expectations that a
modest Fed interest rate cut would limit pressure on the U.S.
dollar.

COMEX gold futures rose in Asia after falling in New York
on Friday. Most active February contract GCG8 was trading up
$3.5 an ounce at $803.7 an ounce.

The most active October 2008 contract on Tokyo Commodity
Exchange <0#JAU:> ended 10 yen per gram higher at 2,891 yen to
track firm cash market.

Platinum XPT= rose to $1,460/1,465 an ounce from
$1,455/1,460 from late New York levels.

Palladium XPD= fell to $343.00/347.00 from $345.50/348.50
an ounce in New York.

Silver XAG= rose to $14.35/14.40 an ounce from
$14.33/14.38 an ounce.
Precious metals prices at 0712 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 797.75 3.15 +0.40 25.49
Spot Silver 14.35 0.00 +0.00 11.67
Spot Platinum 1460.00 -5.00 -0.34 28.98
Spot Palladium 343.00 -5.00 -1.44 3.31
TOCOM Gold 2891.00 10.00 +0.35 18.24
56190
TOCOM Platinum 5107.00 -1.00 -0.02 20.05
27162
TOCOM Silver 520.70 0.00 +0.00 5.55
630
TOCOM Palladium 1248.00 -5.00 -0.40 -0.56
270
Euro/Dollar 1.4652
Dollar/Yen 111.57
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Miho Yoshikawa in Tokyo; Editing by
Ben Tan)