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Gold eases as dollar firms; traders hunker down for Fed

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Gold prices eased on Thursday, weighed down by a slightly firmer dollar, but were stuck in a tight range as market participants awaited further direction on U.S. rate hikes from the Federal Reserve meeting next week.

Spot gold fell 0.1% to $1,784.13 per ounce, as of 0601 GMT, after rising more than 1% on Wednesday amid a pullback in the dollar. U.S. gold futures were down 0.1% to $1,795.50.

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The dollar index was up 0.2%, making gold less appealing for overseas buyers.

“Currently, we are seeing a correction in prices after yesterday’s rally. Gold is likely to find it difficult to build directional momentum one way or another until the Fed meet,” said Ilya Spivak, head of global macro at Tastytrade.

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“If the Fed outcome is in line with expectations, the market will be relieved that it is not worse than expected. The dollar might get weaker and this will anchor gold a bit.”

Most investors expect the Fed to deliver a 50-basis point rate hike on Dec. 13-14. Traders also await the November Consumer Price Index (CPI) report on Dec. 13.

Gold could trade in a $1,765-$1,795 range in the run-up to the Fed meeting, said OCBC FX strategist Christopher Wong, adding focus remained on how hawkish the Fed might sound.

Gold is traditionally considered an inflation hedge and safe investment during economic and geopolitical turmoil. However, high interest rates increase the opportunity cost of holding gold as it yields no interest.

The World Gold Council (WGC) said global gold ETFs (exchange traded funds) holdings fell for a seventh straight month in November, although outflows slowed to a modest 34 tonnes worth $1.8 billion.

Spot silver inched 0.5% lower to $22.62 per ounce, platinum rose 0.3% to $1,005.30 and palladium was up 0.5% to $1,854.65.

(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)

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