* Gold turns lower after market views Fed policy as hawkish
* Gold fails to hold above 200-day moving average
* GRAPHIC-2015 asset returns: link.reuters.com/dub25t
(Rewrites throughout, updates prices; adds comment, Fed
statement, NEW YORK dateline, second byline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Oct 28 Gold prices fell 1
percent on Wednesday, in the metal's weakest session in a month,
as the market turned lower after the U.S. Federal Reserve left
the door open to a possible interest rate hike in December and
the dollar hit a 2-1/2-month high.
The Fed kept interest rates unchanged on Wednesday following
its two-day meeting, as was widely expected, but downplayed
global economic headwinds and left the door open to tightening
monetary policy at its next meeting in December.
The central bank said it was still monitoring economic and
financial developments abroad, but did not repeat that global
risks would have a likely impact on the U.S. economy, as it
warned at its last meeting in September.
Spot gold was down 1.1 percent at $1,153.73 at 2:52
p.m. EDT (1852 GMT), after falling to $1,152, its lowest since
Oct. 13. Prices rose more than 1 percent earlier in the session
when the dollar had weakened against a basket of major
U.S. gold futures for December delivery settled up
0.9 percent at $1,176.10 an ounce prior to the Fed's policy
"The FOMC statement surprisingly only gave a cursory nod to
recent weak data resurrecting the chances of a December rate
hike and causing gold to reverse today's gains," said Tai Wong,
director of base and precious metals trading for BMO Capital
Markets in New York.
Wong said sell-stops were triggered under $1,160 and that a
close below $1,150 would "be particularly poor."
If the Fed raises rates, it would be the first time in
nearly a decade. The Fed held off raising rates last month,
citing global concerns. Fed Chair Janet Yellen has since said
that the bank would still increase rates this year, though some
other policymakers have said otherwise.
"Gold (and silver) had seen heavy short covering and very
elevated levels of long positioning over the past month as
traders began to price in a more dovish FOMC, which would keep
rate hikes off the table for 2015," said Mike Dragosits, senior
commodity strategist for TD Securities in Toronto, in an email.
"This statement, particularly the mention of determining
whether a rate hike at the December meeting is appropriate, was
designed to elevate the probabilities of a December rate hike,
effectively keeping that meeting 'live.'"
Dragosits added that speculators will likely cover their
long positions and add to their short positions, especially with
prices failing to hold above the 200-day moving averages.
Silver also turned down, falling 0.3 percent to
$15.80 an ounce, while palladium fell 0.3 percent to
$672.50. Platinum pared gains and was up 1.1 percent at
$993.50 an ounce.
(Additional reporting by Clara Denina in London and A.
Ananthalakshmi in Singapore; Editing by David Goodman and