September 19, 2017 / 1:58 PM / 3 months ago

PRECIOUS-Gold hovers near 2-week low as dollar dips, Fed meets

    * Market watches Fed talks or clues on U.S. monetary policy
    * Gold has shed 3.6 percent since Sept 8
    * Palladium slides to lowest in a month
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Recasts throughout, updates prices, market activity; adds
comment)
    By Dave Gregorio and Jan Harvey
    NEW YORK/LONDON, Sept 19 (Reuters) - Gold was flat on
Tuesday, barely budged from the prior session's two-week low,
with trading lackluster as Federal Reserve policy makers headed
into a two-day meeting that financial markets will watch for
clues on the outlook for U.S. monetary tightening.
    Trading volume was "slightly softer, which is generally to
be expected ahead of the Fed," said Suki Cooper, precious metals
analyst at Standard Chartered Bank in New York.
    The dollar dipped slightly against a basket of currencies
ahead of the Fed meeting. Analysts expect the Fed to issue a
statement on Wednesday announcing that it will reduce bond
purchases while leaving the door open to a U.S. interest rate
hike in December.             
    "The dollar fell and then rose and that was basically a
mirror image of today's gold market," said Bart Melek, head of
commodity strategy at TD Securities in Toronto.
    A strengthening dollar makes gold less attractive to
investors. Gold is down 3.6 percent from Sept. 8, when it hit a
one-year high of $1,357.54. On that day, the dollar hit its
lowest level against a basket of currencies in more than 2-1/2
years.
    Cooper said Fed balance sheet reduction "has been widely
telegraphed. At the moment we believe we'll see one more rate
hike."
    Spot gold was up 0.21 percent at $1,309.32 per ounce by 2:14
p.m. EDT (1814 GMT), off the previous day's low of $1,304.10.
The most active U.S. gold         futures for December delivery
settled down $0.2, or 0.02 percent, at $1,310.6 per ounce. 
    Worries over North Korea could still boost gold with
safe-haven buying, analysts said. Markets were little changed on
Tuesday after U.S. President Donald Trump addressed the United
Nations General Assembly, vowing to "totally destroy" North
Korea unless Pyongyang backs down from its nuclear challenge.
            
    "My concern at the moment is that this gold rally has been
led by short term tactical investors," Cooper said. Josh Graves,
senior market strategist at RJO Futures in Chicago, noted that
hedge funds and money managers have built a hefty net long
position in gold.             
    "I feel like unless there is some sort of spark to this
market, you're going to see the funds start to unwind that net
long position," he said.
    Among other precious metals, silver        was up 0.35 pct
at $17.27 an ounce, while platinum        fell 0.74 pct at
$952.4 an ounce. Palladium        was down 2.86 pct at $908.73
an ounce was down 2.1 percent at $916.14. Its session low of
$908.97 an ounce was its lowest in a month.

 (Additional reporting by Apeksha Nair in Bengaluru; editing by
Mark Potter and Cynthia Osterman)

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