* Uncertainty about Fed meeting weighs on gold
* Short-covering possible if Fed stays put with stimulus
* Demand still soft in India, China - traders
(Updates throughout; adds comments, second byline, and NEW YORK
By Frank Tang and Jan Harvey
NEW YORK/LONDON, June 18 Gold fell more than 1
percent on Tuesday as U.S. equities rallied and bullion buyers
took to the sidelines before the conclusion of a two-day Federal
Reserve policy meeting they hope will give greater clarity on
the outlook for U.S. monetary policy.
The metal fell for a second day as its safe-haven appeal was
reduced by the rise of U.S. equities on hopes that the Fed will
maintain its current level of stimulus at the end of its Open
Market Committee meeting on Wednesday.
Traders are trying to anticipate the Fed's timetable for
winding down purchases of $85 billion per month of bonds, a
program known as quantitative easing.
Gold, a traditional inflation hedge, has been under pressure
after top Fed policymakers said the central bank could scale
back its stimulus measures.
Analysts said, however, gold could stage a short-covering
rally after the conclusion of the meeting.
"Should the FOMC not come any closer to giving greater
clarification on the asset-buying program, then the gold market
could rally and investors who have been shorting gold in
anticipation of a Fed move away from QE may have to cover," said
James Steel, chief precious metals analyst at HSBC.
"This could prompt a challenge of the $1,400 an ounce
level," Steel said.
Spot gold was down 1.2 percent at $1,367.60 an ounce
at 12:36 p.m. EDT (1636 GMT).
U.S. Comex gold futures for August delivery fell $16
an ounce to $1,367.10.
Concerns that U.S. monetary policy may be reined in have
helped knock gold prices 18 percent lower this year. Gold
analysts say that move may have become overdone, however.
"Gold is trading weaker on the fear that the FOMC may reduce
the volume (of quantitative easing)," said Peter Fertig, a
consultant at Quantitative Commodity Research. "But if anything
they will be scaling out gradually, there will not be an abrupt
end to QE."
INDIAN, CHINESE BUYERS HOLD OFF
Physical demand retreated in India and China, the top two
consumers of bullion, from peak levels reached after a steep
sell-off in April.
A Hong Kong precious metals trader said premiums there had
fallen to $2 an ounce over London spot prices, from a high of $6
last month. Hong Kong sells mainly to buyers in China.
Any signs of a significant slowdown in the Chinese market
would be a big blow to bullion prices because investors expect
China to offset slower buying from India.
Demand in India has eased since the government increased the
import duty on bullion by a third in an effort to reduce its
current account deficit.
Among other precious metals, silver was down 0.7
percent at $21.67 an ounce. Platinum gained 0.5 percent
to $1,437.25 an ounce and palladium fell 1 percent to
$705.72 an ounce.
Prices at 12:36 p.m. EDT (1636 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold 1367.10 -16.00 -1.2% -18.4%
US silver 21.680 -0.001 -0.6% -28.3%
US platinum 1439.80 5.00 0.4% -6.4%
US palladium 709.45 -8.40 -1.2% 0.9%
Gold 1367.60 -16.75 -1.2% -18.3%
Silver 21.67 -0.15 -0.7% -28.5%
Platinum 1437.25 7.25 0.5% -6.5%
Palladium 705.72 -6.78 -1.0% 0.5%
Gold Fix 1366.75 -11.75 -0.9% -17.9%
Silver Fix 21.80 -7.00 -0.3% -27.2%
Platinum Fix 1427.00 1.00 0.1% -6.3%
Palladium Fix 706.00 3.00 0.4% 1.0%
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by David Goodman, Jane Baird and Peter Galloway)