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PRECIOUS-Gold steadies ahead of Fed minutes after steep slide

Gold steadied on Wednesday after its biggest one-day slide in 2-1/2 months as investors awaited Federal Reserve policy meeting minutes for clues on the outlook for U.S. interest rates. But prices were still under pressure from fresh gains in the dollar that kept the metal near a one-week low. Spot gold was at $1,327.81 an ounce at 1235 GMT, down 0.1 percent but off an earlier low of $1,325.20. U.S. April gold futures were down 80 cents an ounce at $1,330.40. "With both the dollar recovering and real yields staying as elevated as they are, that is creating some nervousness (in gold)," Saxo Bank's head of commodity research Ole Hansen said. "Also, the FOMC minutes raise some concerns - the market is more worried about an accelerated rate hiking cycle than any slowdown. The market will be looking to the minutes for further guidance," he said. Gold slid 1.3 percent on Tuesday, the most on any day since Dec. 7, as a rise in U.S. yields boosted the dollar and weakened the appeal of non-interest bearing gold. Benchmark 10-year Treasury yields hovered near a four-year peak on Tuesday. Yields have risen after the U.S. Treasury Department issued more debt in anticipation of a higher deficit from last year's tax overhaul and a budget deal that will lift federal spending over the next two years. Stocks fell in Europe on Wednesday, while the dollar rose 0.2 percent against the euro as traders' near-term focus shifted to the Fed minutes. The minutes, due to be released at 1900 GMT, will be watched for comment on inflation pressures in the world's biggest economy, which could speed up the pace of rate hikes. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Interest in physical gold has been muted this week during the Lunar New Year holiday across much of Asia, including major consumer China. "The return of China will be closely to watched for any renewed physical interest in Asia to stem the weakness," MKS said in a note, adding that the firm dollar and higher Treasury yields were likely to keep the metal under pressure. On the investment side of the market, holdings at the world's largest gold-backed exchange-traded fund, SPDR Gold Shares , rose 3.2 tonnes on Tuesday to 827.79 tonnes. Among other precious metals, silver was down 0.2 percent at $16.42 an ounce, while palladium was 1.3 percent lower at $1,020 and platinum was down 0.5 percent to $995.20. (Additional reporting by Eileen Soreng in Bengaluru; Editing by Mark Pottera and Edmund Blair)

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