October 12, 2016 / 4:26 AM / 10 months ago

PRECIOUS-Gold rises as dollar sags; Fed policy minutes in focus

* Spot gold still targets Oct. 7 low of $1,241.20
-technicals
    * Minutes of FOMC's Sept meeting due at 1800 GMT
    * Platinum, palladium touch multi-month lows

 (Adds comment, updates prices)
    By Swati Verma
    BENGALURU, Oct 12 (Reuters) - Gold edged higher on Wednesday
as the U.S. dollar retreated, with markets waiting for minutes
from the September Federal Reserve policy meeting for more clues
on any interest rate hikes this year.
    Spot gold was up 0.3 percent at $1,255.92 an ounce by
0715 GMT, after falling half-a-percent in the prior session.
    U.S. gold futures gained 0.1 percent to $1,257.4 an
ounce.
    Minutes of the Federal Reserve Open Market Committee's
(FOMC) September meeting are scheduled to be released at 1800
GMT on Wednesday.
    "If the minutes provide more data that the voter members in
the FOMC are showing greater divergence in opinions,
(then)combined with the recent release of U.S. economic data ...
the probability of Fed hiking the interest rates in December is
possibly going to increase," said NAB analyst Vyanne Lai.
    The upside risks to gold prices associated with Republican
candidate Donald Trump's presidency after the first two debates
have also receded, said Lai, adding that the seasonally strong
physical demand period in October would however provide some
support to gold prices. 
    "The overall trend into December would be a downward one."
    Traders have priced in a 70-percent chance that the Fed will
raise rates at its Dec. 13-14 meeting.
    The metal is highly-sensitive to U.S. interest rates,
increases in which lift the opportunity cost of holding
non-yielding gold while boosting the dollar, in which it is
priced.
    The dollar index, which measures the greenback
against a basket of six major currencies, was down 0.1 percent
at 97.589. The index surged to a seven-month high on Tuesday.
 
    "Investors will continue to eye developments for a potential
December FOMC rate hike as well as the race to the U.S.
presidency as key market movers in the near term," Alex
Thorndike, senior precious metals dealer at MKS PAMP Group, said
in a note.
    Spot gold still targets its Oct. 7 low of $1,241.20 per
ounce, as its bounce from this level has completed, according to
Reuters technical analyst Wang Tao. 
    "The spectre of falling U.S. equity markets should
theoretically be supportive for gold," INTL FCStone analyst
Edward Meir said in a note.
    Asian shares hit three-week lows on Wednesday after a dour
start to Wall Street's earnings season knocked U.S. stocks.
 
    Among other precious metals, platinum was up 0.3
percent at $947.60 an ounce, having touched an over-six-month
low of $939.60 an ounce. 
    Palladium gained 0.2 percent to $647.80 an ounce,
after touching a low of $643.72 - its weakest since July 19. 
    Silver climbed 0.7 percent to $17.56 an ounce, having
declined 1 percent in the previous session.

 (Reporting by Swati Verma in Bengaluru; Editing by Joseph
Radford and Sunil Nair)

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