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PRECIOUS-Gold rises as dollar retreats; traders focus on Fed rate-hike path

    * Dollar lurks below recent highs
    * Palladium gains nearly 3%
    * SPDR Gold holdings slip 0.3% on Friday

 (Updates prices)
    By Brijesh Patel
    July 18 (Reuters) - Gold prices firmed on Monday, as the
U.S. dollar pulled back slightly, while investors dialled down
bets of a 100-basis-point interest rate hike by the Federal
Reserve at its upcoming meeting.
    Spot gold        rose 0.7% to $1,719.49 per ounce by 0724
GMT, after falling to its lowest in nearly a year last week.
U.S. gold futures        gained 0.6% to $1,714.30.
    The dollar index        was off its near 20-year high, down
0.3%, making greenback-priced bullion less expensive for buyers
holding other currencies.       
    "The market walked back the idea of a 100-bp rate hike after
Friday's University of Michigan inflation component came in
softer," said Stephen Innes, managing partner at SPI Asset
Management. 
    The University of Michigan's preliminary survey of consumers
for July showed consumers see inflation running at 2.8% over a
five-year horizon, the lowest in a year and down from 3.1% in
June.            
    "Central bank hawkishness has been already priced in, and
with gold holding on to $1,700-per-ounce level last week, we may
see shorts get squeezed a bit as hawks might be disappointed
with the Fed only hiking rates by 75 bps next week."
    Fed officials signalled on Friday that they would stick to a
75-bp rate increase at their July 26-27 meeting to combat
soaring inflation.              
    The European Central Bank is expected to raise rates by 25
bps at its policy meeting later this week.             
    Although gold is seen as an inflation hedge, higher interest
rates hurt the appeal of bullion, which bears no interest.
    Apart from major central bank meetings, market participants
are also waiting to see if Russia resumes the flow of gas
through the Nord Stream 1 pipeline on July 21.            
            
    SPDR Gold Trust      , the world's largest gold-backed
exchange-traded fund, said its holdings fell 0.3% to 1,014.28
tonnes on Friday.          
    Elsewhere, spot silver        rose 1.1% to $18.89 per ounce,
platinum        climbed 1.4% to $862.69, while palladium       
jumped 2.5% to $1,875.12.

 (Reporting by Brijesh Patel and Eileen Soreng in Bengaluru;
editing by Uttaresh.V, Subhranshu Sahu and Rashmi Aich)
  
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