PRECIOUS-Gold drops on firmer dollar, higher bond yields

    * Spot gold may fall to $1,316/oz - technicals
    * SPDR Gold holdings down 0.2 pct on Monday
    * Investors await Fed meeting for rate hike cues

 (Updates prices)
    By Sethuraman N R
    Jan 30 (Reuters) - Gold fell for a second straight session
on Tuesday, hitting its lowest in a week, as the dollar
strengthened and U.S. bond yields rose, while traders awaited a
U.S. Federal Reserve policy meeting for cues on interest rate
hikes this year.
    Spot gold        was down 0.4 percent at $1,335.49 per
ounce, as of 0710 GMT, after a 0.7 percent drop in the previous
session. Earlier in the day, the bullion hit its lowest since
Jan. 23 at $1,334.10.
    U.S. gold futures         were 0.5 percent lower at
$1,335.20 per ounce.
    Gold prices gained 2.5 percent so far this month, largely
due to a weak dollar. The greenback posted its sixth straight
weekly drop last week, hitting a three-year low on Friday, and
is on track for its biggest monthly decline since March 2016. 
    The Fed is widely expected to keep interest rates unchanged
at its two-day policy meeting that starts later in the day.
Investors, however, will be focusing on the central bank's
assessment of the economy and inflation for hints on the
monetary policy outlook. 
    Gold prices have risen over 8 percent since the last Fed
meeting in December.
    "Surprisingly, gold has completely dislocated from its
negative correlation to real interest rates, with both up since
the last Fed meeting... We believe this dislocation is more a
temporary phenomenon than a change in regime," UBS analysts said
in a note.
    "This week's Fed meeting and U.S. jobs report may well be
the catalyst to a re-establishment of the historical negative
correlation between U.S. real rates and gold, as both data
points are likely to support the ongoing monetary policy
tightening in the U.S."
    U.S. Treasury yields surged to more than three-year highs on
Monday after comments from a European Central Bank official
added to expectations that central banks globally will reduce
stimulus as the economic outlook improves.            
    Rising bond yields helped underpin the greenback ahead of a
week packed with U.S. data. The dollar index       , which
measures the greenback against a basket of currencies, rose 0.2
percent to 89.513.       
    The sudden repricing in global bond markets caught a
consolidating gold market off guard, triggering profit-taking,
said Stephen Innes, APAC trading head for OANDA.
    Spot gold may break a support at $1,335 per ounce and fall
more towards the next support at $1,316, as suggested by its
wave pattern and a Fibonacci retracement analysis, according to
Reuters technical analyst Wang Tao.             
    Holdings of SPDR Gold Trust      , the world's largest
gold-backed exchange-traded fund, fell 0.17 percent to 846.67
tonnes on Monday from 848.14 tonnes on Friday.          
    Among other precious metals, silver        slipped 0.2
percent to $17.12 an ounce.
    Platinum        slid over 1 percent to $992.20 after
dropping to $988, its lowest since Jan. 23.
    Palladium        fell 0.7 percent to $1,077.97, after
hitting its lowest since Jan. 11 at $1,075.80.

 (Reporting by Nallur Sethuraman in Bengaluru, Editing by
Subhranshu Sahu and Sherry Jacob-Phillips)