edges lower as dollar gains after hawkish Fed minutes

By Sethuraman N R and Swati Verma

(Reuters) - Gold prices edged lower on Wednesday as the U.S. dollar strengthened after minutes from the Federal Reserve's September meeting cemented expectations for more interest rate hikes by the U.S. central bank.

Spot gold was down 0.1 percent at $1,222.56 per ounce at 3:09 p.m. EDT (1909 GMT). U.S. gold futures settled down $3.6, or 0.29 percent, at $1,227.4 an ounce.

"The fact that the Fed minutes signal more rate hikes is a hawkish statement. Higher rates mean lower gold, typically," said Bob Haberkorn, senior market strategist at RJO Futures.

"Gold is competing with higher rates by the Fed, and the minutes show that policy is going to continue for the time being," Haberkorn said.

Higher U.S. interest rates tend to boost the dollar, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Every Federal Reserve policy maker backed raising interest rates last month, according to the September meeting minutes released on Wednesday.

The Fed hiked rates for the third time this year, and the display of unanimity at the meeting could bolster expectations the committee will raise rates again in December.

The U.S. dollar index rose to its highest level in a week, while a gauge of stocks across the world dipped. [USD/] [MKTS/GLOB]

Gold was still trading just below the 2-1/2-month peak of $1,233.26 per ounce scaled on Monday.

"The selling is contained due to the many other factors supporting gold which investors see in the headlines about U.S. politics, 20 days away for midterm elections, (the) Saudi problem and Brexit," said George Gero, managing director at RBC Wealth Management.

Gold is often seen as an alternative investment during times of political and financial uncertainty.

Gold was also getting a leg from nervous shorts, who are trying to pull out, Saxo Bank analyst Ole Hansen said.

"The market was surprised by the extended short positions and the spike indicated a lot of traders were wrong-footed. It also indicates that the dips are being used to cover the short positions."

Bullion is testing resistance at the 100-day moving average of about $1,226, and a convincing break above that is seen as a bullish sign for investors who follow technical signals.

Meanwhile, some central banks have taken their holdings of gold to record levels in recent months in an effort to maintain the value of their currencies against a rising greenback.

In other metals, silver slipped 0.2 percent to $14.62 per ounce, platinum fell 0.4 percent to $833.30 and palladium was down 0.7 percent at $1,071.00.

(Reporting Nallur Sethuraman, Sumita Layek and Swati Verma in Bengaluru; Editing by Will Dunham, Chris Reese and Jonathan Oatis)