* Investors take profits after 2-month high
* Fed seen cutting rates by at least 50 basis points
* SPDR ETF holdings inch higher
(Adds comment, updates prices)
LONDON, Dec 16 (Reuters) - Gold steadied on Tuesday, as the
dollar softened against the euro and oil prices rose, but
trading was muted ahead of a U.S. interest rate decision.
Spot gold <XAU=> was at $837.85/839.85 an ounce at 1501 GMT,
little changed from $837.80 an ounce in New York late on Monday.
Traders are now awaiting a Federal Reserve announcement on
interest rates due at 1915 GMT. A decision by the Fed's Open
Market Committee to cut rates would augur well for gold.
"Lower interest rates reduce the opportunity cost of holding
gold," said Standard Chartered analyst Daniel Smith.
"If you look at bonds as well, yields are low," he added.
"That again means the opportunity cost of holding other things
is much lower than it was."
The FOMC is widely seen cutting rates by at least 50 basis
points in an effort to stimulate the ailing U.S. economy.
[]
Such a move would take rates to just 0.5 percent, their
lowest in half a century. But even if the central bank opts for
a smaller cut that necessary, it will still augur well for gold,
analysts said.
"Whether the Fed cuts by quarter of a point, half a point,
or three quarters of a point, it is all heading in the same
direction, which is interest rates trending towards zero," said
RBS Global Banking & Markets strategist Stephen Briggs.
Gold was lower in earlier trade, as investors took profits
after Monday's more than 2 percent price rise. The metal hit a
peak of $844.20, its strongest level since Oct. 16.
However, the main external drivers of gold, oil and the
dollar, are underpinning the precious metal. The dollar weakened
against the euro after data showed U.S. housing starts and
permits plummeted to record lows in November. []
Gold is often bought as an alternative asset to the dollar
and tends to move in the opposite direction to it.
Oil was firmer, boosted by expectations OPEC will announce
its largest ever supply cut this week to try and halt a fall in
prices. []
Stronger oil prices support interest in commodities as an
asset class, and can boost buying of gold as an inflation hedge.
ETF HOLDINGS FIRM
Interest in gold exchange-traded funds remains firm. The
world's largest gold ETF, the SPDR Gold Trust <GLD> said its
holdings rose by just over three tonnes on Monday.
[]
Among other precious metals, platinum <XPT=> edged up to
$832/837 an ounce, against $817 in New York late on Monday.
Palladium <XPD=> was at $173/178 an ounce from $171.
Traders are awaiting more news on a mooted U.S. plan to bail
out beleaguered carmakers, the main buyers of platinum.
Platinum reached parity with gold for the first time since
1996 on Thursday, and is holding just below the yellow metal.
"Platinum prices may fall further on worsening auto sales
figures, but production cuts must surely start to turn the
market around," Fairfax analyst John Meyer said.
"Platinum is significantly more expensive to produce than
gold and its concentration in South Africa, where mining costs
continue to rise, makes the metal sensitive to the South African
rand."
"A weaker rand might help to keep price levels down but a
weakening U.S. dollar may not help this cause," he added.
"Sooner or later platinum prices must surely pick up, unless we
all suddenly convert to battery powered cars."
Spot silver <XAG=> was quoted at $10.57/10.65 an ounce, down
from $10.62 an ounce.
(Reporting by Jan Harvey; Editing by Anthony Barker)
