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PRECIOUS-Gold drifts lower as dollar firms ahead of Fed

    * FOMC statement due at 1800 GMT
    * Dollar index steady above previous day's 13-month low

 (Recasts lead, adds details, updates prices)
    By Nithin ThomasPrasad and Arpan Varghese
    BENGALURU, July 25 (Reuters) - Gold prices fell on Wednesday
as the dollar firmed above multi-month lows, with investors
waiting for clues on the U.S. Federal Reserve's tightening plans
after the conclusion of a two-day meeting.
    The U.S. central bank will issue its monetary policy
statement at 2 p.m. EDT (1800 GMT), where it is expected to hold
interest rates unchanged and possibly hint that it will start
winding down its massive holdings of bonds as early as
September.
    Spot gold        fell 0.27 percent to $1,245.16 per ounce at
0629 GMT.    
    U.S. gold futures         for August delivery fell 0.61
percent to $1,244.50 per ounce.
    "Markets are certainly a little bit cautious ahead of the
Fed meeting and that's probably hindering investor appetite," 
said ANZ analyst Daniel Hynes. "I think the market will be
looking for any comments around inflation."
    Economists expect the Fed's benchmark lending rate to remain
in a target range of 1.00 percent to 1.25 percent.              
  
    "At this stage, we would rather be neutral on gold as Fed
wording could throw the market off (in either direction)," said
INTL FCStone analyst Edward Meir.
    Higher interest rates would push yields up and likely boost
the dollar.
    Higher yields increase the opportunity cost of holding
non-yielding gold, while a stronger dollar makes bullion more
expensive for non-U.S. investors.
    "Stronger U.S. economic data has also weighed on gold, but
has been negated by the weak inflation outlook," said ANZ's
Hynes. "Assuming that we don't see any sort of change in
language from the Fed meeting, I suspect we'll see safe haven
demand pushing gold prices up." 
    Long-dated U.S. Treasury yields jumped by the most in almost
five months on Tuesday as stocks hit record highs.      
    Asian stocks steadied, while the dollar held firm as
investors awaited the Fed's policy decision.                    
   
    Meanwhile, holdings at the SPDR Gold Trust      , the
world's largest gold-backed exchange-traded fund, fell 1.13
percent to 800.45 tonnes on Tuesday from 809.62 tonnes on
Monday.             
    In other precious metals, silver        slipped 0.6 percent
to $16.36 per ounce.
    Platinum        edged 0.2 percent lower to $922.00 per
ounce, while palladium        dropped 0.4 percent to $853.70 per
ounce. 

 (Reporting by Nithin Prasad and Arpan Varghese in Bengaluru;
Editing by Joseph Radford and Biju Dwarakanath)
  
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