(Updates to afternoon with quotes, prices)
By Atul Prakash
LONDON, April 29 (Reuters) - Gold hit a one-month low on
Tuesday on a firmer dollar and weaker oil prices, with investors
unwinding their trading positions ahead of this week's Federal
Reserve meeting on interest rates.
Gold often takes its cue from movements in the dollar
because of its role as an alternative investment to currencies,
stocks and bonds. The outcome of the Fed meeting would set the
tone for currencies and precious metals, dealers said.
"Strength in the U.S. dollar is clearly a major factor, plus
we have seen a quite bit of money coming out of the StreetTRACKS
exchange-traded fund. Both these things are weighing on the
market," said Dan Smith, analyst at Standard Chartered Bank.
"There is some indication of consumers starting to come back
in at these lower prices, but we are waiting to see how powerful
that would be. I am looking for prices to recover somewhat from
where we are now," he said.
Gold held in StreetTRACKS Gold Shares, the world's largest
gold-backed ETF, fell more than 50 tonnes in less than a week to
about 591 tonnes as of Monday.
Spot gold <XAU=> fell as low as $874.90 an ounce and was
quoted at $879.10/879.80 at 1430 GMT, against $891.65/892.65
late in New York on Monday, when it hit an intraday day high of
$895.50 on speculative buying driven by record high oil.
"It is following the currency and taking its lead from oil.
$880 is an important area. If we hold here, then we are fine,"
said Peter Hillyard, head of metals sales, ANZ Investment Bank.
"But if it fails, then it could drop quite dramatically."
The dollar hit its highest level against the euro in nearly
four weeks, on track for its largest monthly gain in nearly a
year, amid expectations the Federal Reserve will signal the end
of its easing campaign.
The Fed will begin its two-day meeting later on Tuesday and
analysts expect the policy-setting body to cut key borrowing
costs by a quarter percentage point to 2.0 percent and indicate
that its rate-cutting campaign is finished for now.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil fell more than $2 a barrel, retreating further from a
record high hit on Monday, as the dollar firmed and a strike
ended at Britain's Grangemouth refinery.
FED DECISION AWAITED
"Investors wait for the U.S. Fed's decision on interest
rates. Expectations are that the Fed will signal an end to rate
cuts, which will drag down gold prices," Fairfax investment bank
said in a daily market report.
Spot gold has been trading well below its lifetime high of
$1,030.80 an ounce hit on March 17, with attempts to revisit the
level resulted in heavy profit-taking by investors.
U.S. gold futures for June delivery <GCM8> fell $15.50 an
ounce to $880.
In industry news, one mineworker was killed and two were
trapped underground at Gold Field's <GFIJ.J> number 10 shaft at
Driefontein mine after a seismic event, the National Union of
Mineworkers said, adding two workers were admitted to hospital
in a critical condition. []
Aquarius Platinum Ltd <AQP.AX> said it had completed the
repurchase of Impala Platinum's <IMPJ.J> stakes for a total
consideration of $504.9 million. Impala is the world's second
biggest platinum producer. []
Other precious metals also fell, with spot platinum <XPT=>
slipping more than 1 percent to $1,941/1,951 an ounce from
$1,964.50/1,974.50 late on Monday.
Silver <XAG=> fell to $16.65/16.70 from $16.96/17.02 an
ounce, while palladium <XPD=> dropped to $428.50/433.50 an ounce
from $432.50/438.50 in the U.S. market late on Monday.
(Reporting by Atul Prakash; editing by Peter Blackburn)
