March 20, 2018 / 10:21 AM / 10 months ago

PRECIOUS-Gold edges lower on strong dollar ahead of Fed rate decision

    * Fed expected to raise U.S. interest rates
    * Investors look for guidance on future rate hikes
    * Stronger U.S. dollar pressures gold
    * ETF gold holdings at highest since November 2016

 (Updates prices; adds comment, additional byline, NEW YORK to
    By Renita D. Young and Peter Hobson
    NEW YORK/LONDON, March 20 (Reuters) - Gold prices fell on
Tuesday as the U.S. dollar strengthened ahead of a Federal
Reserve meeting at which the U.S. central bank is expected to
raise interest rates for the first time this year. 
    The looming Fed meeting has helped to push gold down 4
percent from a 1-1/2-year high reached in January. 
    Higher U.S. interest rates are gold-negative because they
raise bond yields, reducing the appeal of non-yielding bullion.
They also tend to boost the dollar, making gold more expensive
for users of other currencies.    
    Spot gold        was trading 0.3 percent lower at $1,312.16
per ounce at 1:35 p.m. EST (1735 GMT), while the dollar
strengthened against a basket of currencies               and
U.S. bond yields rose      . 
    U.S. gold futures         for April delivery settled down
$5.90, or 0.5 percent, at $1,311.9 per ounce. 
    "Everyone's wondering how many dots will be on the plot for
2018. The market has priced in up to three hikes," said Rob
Haworth, senior investment strategist for U.S. Bank Wealth
    The Fed will likely take a cautious approach on raising
interest rates, helping lift gold prices, said Saxo Bank analyst
Ole Hansen. 
    "With inflation not really picking up, rising geopolitical
risk, trade wars looming and a flattening yield curve - this is
not a backdrop that gives the Fed any urgent need to step up the
speed of rate hikes," Hansen said.  
    Gold prices have tended to fall ahead of Fed rate increases
in recent years and to rise after them.
    As gold has fallen, funds have scaled back bets on higher
prices, with the net long position in Comex gold falling to
about 136,000 contracts from almost 210,000 in late January.
    That gives investors more space to buy gold, which could
help prices to recover, MKS trader Sam Laughlin said. 
    Holdings of gold in exchange-traded funds (ETFs) tracked by
Reuters have meanwhile jumped to the highest level since
November 2016.                
    "That tells me longer-term investors have not given up their
belief in higher prices," Saxo Bank's Hansen said. 
    Technical support for gold was at its 100-day moving average
of $1,305 an ounce. 
    Meanwhile, silver        lost 0.8 percent at $16.17 an ounce
after reaching a three-month low. Echoing gold's drop, silver
dropped nearly 9 percent from a four-month high in January.
    Platinum        dropped 1.2 percent to $941.99 per ounce
after touching its lowest price since Jan. 3 on Monday. 
    Palladium       , fell 0.9 percent to $981.45 after earlier
hitting a one-week low of $974.95 per ounce.

 (Additional reporting by Nithin Prasad and Eileen Soreng in
Editing by David Goodman and Paul Simao)
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