PRECIOUS-Gold gains as dollar, stocks slide; markets eye Fed

 (Updates prices)
    * Palladium hits a record high of $1,269.50/oz
    * Specs net long in gold for first time since July - CFTC
    * Spec positions in commodities:

    By Swati Verma
    Dec 17 (Reuters) - Gold rose on Monday as a slide in the
dollar made bullion more attractive for holders of other
currencies, while some investors took cover as stocks globally
slipped into the red ahead of the U.S. Federal Reserve's two-day
policy meeting.
    Palladium climbed to an all-time high of $1,269.50 early in
the session on a prolonged deficit in the market and increased
speculative interest, with prices trading at a premium to
    Spot gold        was up 0.6 percent at $1,246.10 per ounce
by 01:36 p.m. EST (1836 GMT). The metal touched its lowest since
Dec. 4 at $1,232.39 an ounce on Friday.
    U.S. gold futures         settled up 0.8 percent at
$1,251.80 per ounce.
    The dollar        slipped ahead of the Fed's policy meeting,
which ends on Wednesday. Investor focus will be on the central
bank's policy outlook for 2019 and future interest rate hikes.
    "One of the drivers that is pushing gold higher right now is
the flight to safety (due to lower equities), along with the
dollar being sold-off a bit," said Michael Matousek, head trader
at U.S. Global Investors.
    "Some traders are also positioning themselves so that if the
Fed does not raise rates, gold might spike."
    Weak stock markets and slowing global growth have raised
speculation that the Fed will need to pause its tightening cycle
or risk harming the U.S. economy.
    Stocks fell on concerns over global growth that sent world
equity markets to 17-month lows last week. Markets were also
concerned about a possible U.S. government shutdown.
    Investor sentiment toward gold showed signs of optimism.
    Speculators switched to a net long position in gold of
10,252 contracts, adding 11,791 contracts in the week to Dec.
11, data showed on Friday. 
    This was the first time gold speculators have held a net
long position since July, and the strongest since June.        
    "With increased volatility and geopolitical risk, macro
asset allocation is becoming more gold-positive again, while we
believe much of the dollar's upward move is now behind us with
rate hike expectations dropping," analysts at BMO Capital
Markets said in a note.
    "This should support gold pricing and gold equity valuations
into the middle of 2019, in our view."
    Silver        was up 0.6 percent at $14.66 per ounce, while
platinum        rose 1 percent at $795.10 per ounce.
    Spot palladium        was 1.2 percent higher at $1,252.70
per ounce.
    "We believe the tightness is partly due to the market's
small size, its lack of transparency and insufficient liquidity.
Together with the bullishness of the technical traders, this
provides the potential for even higher prices," Julius Baer
analysts wrote.
    "Yet we do not believe these price levels would be
sustainable in the medium to longer term."

 (Reporting by Swati Verma and Sumita Layek in Bengaluru;
Editing by Steve Orlofsky and Dan Grebler)