* Markets await outcome of U.S. Fed’s March 19-20 meeting
* Gold specs trim net longs for a third straight week
* SPDR gold holdings slip on Friday
* Palladium trading near last session’s record peak (Adds comments, updates prices)
By Swati Verma
March 18 (Reuters) - Gold prices rose for a second straight session on Monday, as the dollar slipped after sombre U.S. data increased chances the Federal Reserve will signal a dovish policy stance at its meeting this week.
Spot gold rose 0.2 percent to $1,303.92 per ounce by 0804 GMT. U.S. gold futures gained 0.1 percent to $1,303.80.
The U.S. Fed will begin its meeting on interest rates on Tuesday, which ends with a news conference on Wednesday.
“The narrative has completely changed. A year or six months back, people were talking about policy normalisation, and now to be accommodative. With the flow of U.S. data we had, it could be quite supportive for gold,” said Hitesh Jain, vice president, Yes Securities.
U.S. manufacturing output fell for a second straight month in February and factory activity in New York state hit nearly a two-year low this month, data showed on Friday, underscoring Fed’s “patient” stance towards further interest rate increases this year.
Markets currently expect there will be no rate hikes this year, and are even building in bets for a rate cut in 2020.
However, if the Fed indicates a possibility of rate cut this year itself then gold prices could skyrocket, Jain said.
The dollar index slid 0.2 percent, having posted its biggest weekly decline since early December last week.
“One of the most important drivers for gold is the U.S. dollar strength and the dollar is in turn beholding to the U.S.-China trade negotiations,” said Michael McCarthy, chief market strategist, CMC Markets, adding $1,290 and $1,310 are the key support and resistance levels, respectively.
Investors since last year have favoured the dollar as a safe haven against the U.S.-China trade war. Markets have been on the edge as a resolution to the dispute is taking longer than expected.
“Dollar positioning into this week’s FOMC meeting will likely be the key determinant for precious price action, while Brexit developments will also be closely watched,” traders at MKS PAMP wrote in a note.
British Prime Minister Theresa May’s government was scrambling on Sunday to get support in parliament for her Brexit deal at the third time of asking.
Meanwhile, data on Friday showed speculators have reduced their net long positions in gold for a third straight week and holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, also fell.
Among other precious metals, palladium was up 0.1 percent at $1,562.01 per ounce, close to a record peak of $1,567.50 hit in the previous session.
Silver gained 0.4 percent to $15.33 an ounce, while platinum rose 0.5 percent to $832.25. (Reporting by Swati Verma and K. Sathya Narayanan in Bengaluru; Editing by Rashmi Aich and Shreejay Sinha)