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PRECIOUS-Gold firm as dollar catches breath ahead of Fed rate decision
December 14, 2016 / 3:54 AM / a year ago

PRECIOUS-Gold firm as dollar catches breath ahead of Fed rate decision

* Fed statement scheduled for 1900 GMT Wednesday
    * Expected to hike U.S. interest rates
    * Dollar down 0.2 pct, Asian stocks firm

 (Adds comment, updates prices)
    By Swati Verma
    BENGALURU, Dec 14 (Reuters) - Gold prices edged higher on
Wednesday on a weaker dollar and as markets waited for the
outcome of the U.S. Federal Reserve's policy meeting later in
the day.
    Spot gold was up 0.3 percent at $1,161.73 an ounce by
0633 GMT and U.S. gold futures were 0.4-percent higher
at $1,163.70.
    The dollar index, which measures the greenback
against a basket of currencies, was down 0.2 percent at 100.88,
having slipped from this week's high of 101.78 touched early on
Monday. 
    "(The rise in gold prices) is because of the weaker dollar
and also the anticipation of what the Fed will decide," said
Brian Lan, managing director at Singapore-based gold dealer
GoldSilver Central.
    "The things that will move the markets more would definitely
be on how many times the Fed will raise interest rates next
year."
    The Fed is widely expected to increase U.S. interest rates
at this week's Federal Open Market Committee meeting, with
investors looking for clues on the central bank's views on
further hikes in 2017.
    Higher U.S. rates raise the opportunity cost of holding
non-yielding bullion.
    The outcome of the policy meeting will be announced at 1900
GMT, followed by Chair Janet Yellen's news conference half an
hour later.
    "A Fed rate hike has been 100 percent priced in, and the
market expects that maybe Yellen's comments tonight on rate hike
projections for the next year will not be too hawkish," said
Helen Lau, an analyst at Argonaut Securities in Hong Kong.
    "So that is the reason why dollar has weakened a little bit,
and that's what is supporting gold prices." 
    Meanwhile, holdings of SPDR Gold Trust, the world's
largest gold-backed exchange-traded fund, are down over 9 pct
since November. 
    "People who invest in ETFs will have a relatively longer
term view, so the current rotation is rotate out of gold to
risky assets, expecting that the U.S. economic situation will
improve," Lau said.
    Asia shares crept cautiously higher on Wednesday and the
two-year U.S. debt yield rose to a 6-1/2 year high on
Tuesday.  
    "ETF liquidation shows investors' uninspired gold view.
Until the 'slow bleed' out of the ETFs ceases, it will be
difficult for gold to rally," HSBC analyst James Steel wrote in
a note.
    Elsewhere, silver was up 0.7 percent at $17.02 per
ounce after falling nearly 1 percent in the previous session.
    Platinum rose 0.4 percent to $936 an ounce.
    Palladium was unchanged at $728.80 an ounce, having
risen about 1 percent on Tuesday.

 (Reporting by Swati Verma in Bengaluru; Editing by Joseph
Radford)

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