* UK and U.S. political uncertainty dominates sentiment
* Market looking ahead to U.S. Fed meeting
By Pratima Desai
LONDON, June 7 Gold prices held near seven-month
highs on Wednesday with sentiment still bullish due to political
uncertainty created by an election in Britain and testimony by a
former FBI director to the U.S. Senate.
However, bullion came under some pressure after the dollar
rose against the euro due to reports that the European Central
Bank was preparing to cut its inflation forecasts on Thursday.
A rising U.S. currency makes dollar-denominated gold more
expensive for holders of other currencies, potentially subduing
Spot gold was down 0.2 percent at $1,291.1 an ounce
at 1345 GMT. On Tuesday, it gained 1.1 percent to hit its
highest level since November last year at $1,295.97. U.S. gold
futures slipped 0.2 percent to $1,294.2.
"Gold is being driven by ... U.S. politics and the UK
election," said SP Angel analyst John Meyer. "Indian tax changes
over the weekend could increase demand for tola bars."
Tola is a traditional Indian measurement unit of 0.375 troy
ounces. India last weekend said it would tax gold at 3 percent
under a new sales levy that comes into effect on July 1, lower
than the 5 percent tax expected.
In the United States, former FBI director James Comey's
testimony on Thursday could further hurt President Donald Trump
and potentially derail his plans to roll back regulation and
In Britain, markets are worried the ruling Conservative
party might not get a majority in Thursday's elections. Prime
Minister Theresa May wants to increase her majority to
strengthen Britain's hand in exit talks with the European Union.
Traders are also looking ahead to a meeting of the U.S.
Federal Reserve next week.
"We do expect gold to hit some turbulence as we approach the
June Fed rate hike, but things could open up for the precious
metal post-meeting if the central bank's language remains
dovish," said INTL FCStone analyst Edward Meir.
Among other precious metals, platinum fell 0.7
percent to $949.5 an ounce and palladium slid 1.6 percent
to $839.5 after earlier touching $859.80 an ounce, its highest
since Sept. 2014.
Platinum is used mainly to make autocatalysts for
diesel-fuelled cars, while palladium is mainly used for
autocatalysts in gasoline-fuelled cars.
"(Palladium has) a much broader exposure to global car
markets. According to data from the United States, Europe and
Japan, the recent slowdown in sales continued also in May,"
Julius Baer analysts said in a note.
"We stick to our negative view (on palladium) and
short-position, expecting prices to realign with the weaker
demand backdrop over the coming months."
Silver was unchanged at $17.67 an ounce.
(Additional reporting by Vijaykumar Vedala and Koustav Samanta;
editing by David Clarke and Louise Heavens)