Gold ends tad higher

NEW YORK/LONDON (Reuters) - Gold futures ended slightly higher in quiet trade Tuesday as the market took a breather amid a resilient dollar, and bullion investors now focused on the upcoming Federal Reserve's policy-setting statement.

The dollar largely held ground as investors continued to trade on the strong U.S. jobs numbers from Friday. Gold futures have closed lower for the past four sessions on the dollar's resiliency.

"Gold fails to turn higher as the dollar is firm and oil is lower. Nothing is going to happen until the Fed meeting is over," said Leonard Kaplan, president of Illinois-based Prospector Asset Management.

Traders are cautiously awaiting a two-day monetary policy meeting by the U.S. Federal Reserve that kicks off on Tuesday. While the Fed is likely to hold interest rates, Chairman Ben Bernanke's accompanying statement will be scrutinized for clues on the direction of the U.S. economy.

December gold settled up 70 cents at $947.60 an ounce on the COMEX division of the New York Mercantile Exchange.

Spot gold at $945.30 an ounce at 2:40 p.m. EDT (1840 GMT), against $944.65 an ounce late in New York on Monday.

Gold is mainly being driven by the currency markets at present, analysts said, as a stronger dollar makes commodities priced in the currency more expensive for non-U.S. investors.

Better-than-expected economic data, a recovery in equity markets and the success of the government's Cash for Clunkers program to revitalize car sales are all boosting hopes the recession may be bottoming out in the United States.

If Bernanke confirms this view, it could lift expectations interest rates will rise, which may benefit the dollar. The U.S. unit has previously benefited from economic weakness as it is seen as a haven, but this trend may be turning, analysts say.

"The dollar's ability to rally amid this improving economic environment is a major change and shows that the focus of dollar strength is shifting from risk aversion to future interest rate hikes," MF Global said in a note.

GOLD INVESTMENT DEMAND LACKS

Oil dipped, meanwhile, reversing earlier gains, as equities fell and the dollar firmed. Strength in the commodities bellwether can indicate rising interest in the asset class, and fuels interest in gold as a hedge against inflation.

But lackluster physical and investment demand for gold remains a drag on prices.

The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, said its holdings declined by another 11,329 ounces on Monday, and have fallen more than 65 tonnes from record levels since June 1.

While ETF inflows have slowed in the second and third quarters after a strong start to the year, investment in futures on New York's COMEX exchange have risen to balance this out. But the sustainability of this trend is uncertain, analysts said.

However, ETFS Silver Trust (SIVR.P), a U.S. exchange-traded product (ETP) trading on the New York Stock Exchange, said its silver bullion holdings exceeded $80 million, underscoring interest among retail investors.

(Additional reporting by Martina Fuchs in London; Editing by Lisa Shumaker)