(Corrects New York spot silver price in paragraph 17)
By Tamora Vidaillet
LONDON, April 30 (Reuters) - Gold fell to a three-month low
on Wednesday as investors squared positions and took profits
ahead of a decision on U.S. interest rates by the Federal
Reserve later in the day.
Gold <XAU=> fell to $866.20/$867.20 an ounce at 0942 GMT from
$873.55/874.75 an ounce late in New York on Tuesday, when it
tumbled to $868.20 an ounce, its lowest since late January, on a
combination of a rise in the dollar and a fall in oil.
The metal has come under pressure over the last week as the
dollar recovered against the euro and oil prices retreated from
record highs.
"I think the market is being driven by month-end liquidity
and the Fed tonight," said an analyst from MKS Finance.
"Gold could trade sideways but I think the profit-taking
will continue and that the lack of confidence in gold is going
to increase," he said.
The Fed is expected to unveil its decision to trim interest
rates by a modest quarter percentage point at around 1815 GMT on
Wednesday. Analysts say it may also suggest the rate-cutting
cycle it kicked off last autumn has reached an end.
Any pause in trimming rates would theoretically support the
dollar and reduce gold's appeal as an alternative investment.
But analysts revealed divisions towards the outlook for gold
prices, with some expecting the metal to witness bursts of
physical demand following heavy price declines in recent weeks.
Gold has lost more than 15 percent in value since spiking to
a record high at $1,030.80 on March 17, but the drop has
attracted physical buying from jewellers.
In the physical sector, jewellery makers from India to
Indonesia have snapped up purchases of bullion after it dived to
lower levels, pushing up premiums for gold bars in Southeast
Asia. []
Dealers saw buying from India, the world's largest gold
consumer, ahead of a religious festival in May, as well as
demand from jewellers in Thailand, Vietnam and Indonesia, which
is Southeast Asia's main buyer.
Expectations of further declines in the dollar over the
coming three months should help support gold prices, said Suki
Cooper, precious metals analyst at Barclays Capital.
"I don't think we will see a dramatic rally in gold unless a
new catalyst emerges but the overall environment remains quite
positive, and physical buying emerging on price dips should keep
prices underpinned," she said.
The dollar steadied on Wednesday, with investors showing a
reluctance to take significant bets ahead of the Fed move.
It was barely changed at 104.06 yen <JPY=>, while the euro
was flat at $1.5560 <EUR=>, holding near a one-month low of
$1.5540 hit the previous day.
Spot platinum <XPT=> fell to $1,907.00/1,922.00 an ounce
from $1,918/1,938 late on Tuesday.
Silver edged down to $16.49/16.54 an ounce from $16.51/16.59
an ounce. Spot palladium dropped to $414.00/420.00 an ounce from
$421/429 an ounce.
(Additional reporting by Lewa Pardomuan in Singapore)
(Reporting by Tamora Vidaillet; Editing by Peter Blackburn)
