PRECIOUS-Gold adds to gains but looming U.S. rate hike weighs

(Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Dec 9 (Reuters) - Gold extended gains on
Wednesday, supported by softness in the dollar, but the metal's
upside was limited as investors anticipated a Federal Reserve
rate hike next week. 
    Bullion traders are not optimistic of a sustained rally in
prices as the U.S. central bank is widely expected to raise
interest rates for the first time in nearly a decade at its next
policy meet on Dec. 15-16.
    Higher rates are expected to dent demand for
non-interest-paying gold, which has already lost 9 percent of
its value this year in anticipation of the rate hike. 
    Spot gold rose 0.3 percent to $1,077.60 an ounce by
0643 GMT, after rising 0.4 percent on Tuesday as the dollar slid
against a basket of major currencies. The metal is about $30
higher than a near-six-year low reached last week.
    "Gold will consolidate in the $1,065 to $1,085 range ahead
of the Fed meeting," said Ronald Leung, chief dealer at Lee
Cheong Gold Dealers Ltd in Hong Kong. 
    Bullion is tracking the dollar for now, he said.
    The dollar slipped for a second day against other major
currencies on Wednesday, after climbing to a 12-1/2-year high
last week on expectations of the rate hike. 
    Gold traders chose to cover their shorts on the dollar
weakness. Speculators' net short positions in COMEX gold futures
and options were at a record high in the week to Dec. 1,
according to the most recent data. 
    Investors have been boosting bets that gold will soon drop
to $1,000 an ounce, options data show, ahead of next week's Fed
meeting. 
    The slide in commodity prices, particularly crude oil, is
also weighing on gold. Crude has fallen to its lowest in nearly
seven years as OPEC continues to pump near-record amounts of oil
to defend market share. 
    Weakness in oil could trigger fears of deflation, a bearish
factor for gold, which is often used as a hedge against oil-led
inflation.
    
    PRICES AT 0643 GMT   
 Metal            Last     Change   Pct chg
                                           
 Spot gold         1077.6     3.29     0.31
 Spot silver        14.19    0.033     0.23
 Spot platinum     847.25     1.65      0.2
 Spot palladium    545.66      0.1     0.02
 Comex gold        1076.7      1.4     0.13
 Comex silver      14.165    0.049     0.35
                                           
 COMEX gold and silver contracts show the
 most active months
 
 (Reporting by A. Ananthalakshmi; Editing by Tom Hogue and
Subhranshu Sahu)