* Fed statement on Wednesday key to gold's next move
* Geopolitical tensions provide floor to gold
(Adds action in U.S. session and trader's comment; adds NEW
YORK to dateline, new byline)
By Barani Krishnan and Jan Harvey
NEW YORK/LONDON, July 29 Gold fell on Tuesday as
investors nervously awaited the end of U.S. Federal Reserve's
two-day policy meeting on Wednesday to see if the central bank
will raise interest rates faster than expected.
Further weighing on the market was some selling in the
August U.S. gold futures contract, traders said, as the contract
headed for expiration over the next few weeks.
"What really mattered of course was what people were
thinking would happen at the FOMC," said George Gero, a senior
gold analyst at RBC Capital Markets in New York, referring to
the meeting of the Fed's Federal Open Market Committee.
The FOMC will issue a statement on Wednesday that will be
studied closely for clues on when the central bank is likely to
start raising rates.
Gold is highly sensitive to any changes in U.S. monetary
policy. It rallied to record highs in the wake of the financial
crisis after the Fed slashed rates and opted for extraordinary
Last Thursday, bullion hit a five-week low below $1,300 an
ounce on speculation that U.S. job gains so far this year could
accelerate the need for higher interest rates. Fed Chair Janet
Yellen said earlier this month the central bank might raise
rates sooner than expected if labor growth remained robust.
U.S. second-quarter GDP data, due on Wednesday, and July
employment numbers due on Friday are other indicators the market
will be watching.
Traders and investors will also closely scrutinize
Wednesday's FOMC statement for any change in the Fed's stimulus
rollback. The central bank has typically cut $10 billion from
its monthly bond buying program at each recent policy meeting.
At 4:30 p.m. EDT (2030 GMT), the spot price of gold
was down 0.4 percent at $1,299.10 an ounce after rising to as
high as $1,312.10 earlier in the day.
The most-active U.S. gold futures contract also
settled down 0.4 percent at $1,298.30.
Geopolitical tensions have prevented gold from falling too
far in recent sessions, however, as some investors have taken to
it for its safe-haven quality.
In the latest clashes between Ukrainian troops and
pro-Russian rebels, dozens of people were killed in eastern
Ukraine. Meanwhile, Israel knocked out Gaza's only power plant,
flattened the home of its Islamist political leader and pounded
dozens of other high-profile targets.
In the physical bullion market, demand was subdued as buyers
awaited a possible price drop. Asia's major gold consumers have
bought less this year compared with 2013, data showed.
In other precious metals, silver slipped 0.1 percent
to $20.55 an ounce. Platinum fell 0.5 percent to
$1,472.50. Palladium was also lost 0.5 percent to
(Additional reporting by A. Ananthalaskshmi in Singapore;
Editing by Jane Baird, Susan Fenton, Dale Hudson and Peter