PRECIOUS-Gold stabilizes ahead of U.S. monetary policy meeting

    * Gold's correlation with dollar intact
    * Market looking for clues to timing of U.S. rate rises

 (Updates prices, adds analyst comment and adds NEW YORK to
    By Renita D. Young and Pratima Desai
    NEW YORK/LONDON, July 30 (Reuters) - Gold steadied on Monday
ahead of a meeting of the U.S. Federal Reserve this week that
could yield clues to the future direction of U.S. interest rates
and the dollar, key factors for precious metals prices.
    Spot gold        was steady at $1,223.14 per ounce by 1:34
p.m. EDT (1734 GMT), compared with a one-year low of $1,211.08
hit earlier this month. U.S. gold futures         for August
delivery settled down $1.70, or 0.1 percent, at $1,221.30 per
    A higher U.S. currency makes dollar-denominated gold more
expensive for holders of other currencies, which could subdue
demand. Dollar gains since the middle of April have led to
losses of about 10 percent for spot gold prices.       
    "Gold is still a dollar story, and I see no sign of the
correlation breaking down," said Oliver Nugent, commodities
strategist at ING, adding that a significant driver for dollar
gains has been safe haven flows due to trade tensions. "Lack of
investor interest is leading gold to behave like a currency,
there are no safe haven flows to gold."
    The United States signaled last week it is set to push ahead
with talks with Canada and Mexico after agreeing to suspend
hostilities over tariffs with Europe in a deal that may clear
the way for renewed pressure on China.             
    "There's a flurry of Fed announcements coming out this week,
and I think we are in a holding pattern until we hear from one
of these central bank opinions," said John Caruso, senior market
strategist at RJO Futures.
    The Bank of Japan ends a two-day monetary policy meeting on
Tuesday, while the Bank of England is expected to raise interest
rates on Thursday.            
    The U.S. central bank's two-day meeting, which starts on
Tuesday, is expected to keep benchmark interest rates steady
after hiking in June. Investors will be looking for clues to the
timing of the next rise. Expectations are for two more rate
rises this year and three next year.        
    "Higher U.S. interest rates create an opportunity cost for
investors," a gold trader said, referring to gold earning no
interest or dividends while costing money to insure and store. 
    Hedge funds and money managers increased their net short
position in COMEX gold contracts to their highest since 2006, in
the week to July 24, recent U.S. Commodity Futures Trading
Commission data showed.             
    Silver        was up 0.4 percent at $15.52 an ounce,
platinum        added 0.2 percent at $827 and palladium        
gained 0.3 percent at $923.50.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
David Evans, Susan Fenton and Will Dunham)