Gold claws back from four-month low; investors await Fed

By Eileen Soreng

BENGALURU(Reuters) - Gold prices rose on Wednesday, ticking up from a four-month low hit in the previous session, as Chinese buyers returned to the market following the Labour Day holiday, while investors waited for cues on U.S. monetary policy from a two-day Federal Reserve meeting.

Spot gold was up 0.5 percent at $1,309.71 per ounce at 0653 GMT. Gold fell to $1,301.51 in the previous session, its lowest since Dec. 29, 2017.

U.S. gold futures for June delivery rose 0.31 percent to $1,310.80 per ounce on Wednesday.

"The Chinese are back from a long holiday and we're seeing some buying interest on the downside," said Peter Fung, head of dealing at Wing Fung Precious Metals.

But gains should be limited as the dollar is firm and as people are waiting for U.S. non-farm payroll data, added Fung.

The dollar index was down about 0.1 percent at 92.357, but the greenback hovered close to a near four-month high of 92.566, supported by the outlook for a strong U.S. economy and rising yields amid signs of slowdown elsewhere, especially in Europe. [USD/]

While the Fed is widely expected to keep interest rates on hold at its policy meeting ending on Wednesday, the central bank will likely encourage expectations that it will lift borrowing costs in June on the back of rising inflation and low unemployment. The Fed is due to announce its decision at 2 p.m. EDT (1800 GMT).

Investors are also focused on the April U.S. non-farm payrolls report due on Friday, which could provide further signs of economic strength.

Inflation is sometimes regarded as gold-positive, because bullion is seen as a safe-haven when price pressures rise, but higher interest rates imposed to fight inflation make the non-yielding metal less attractive.

Spot gold may end its current bounce below resistance at $1,317 per ounce and then retest support at $1,302, as suggested by a Fibonacci ratio analysis, according to Reuters technical analyst Wang Tao.

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.51 percent to 866.77 tonnes on Tuesday.

Among other precious metals, spot silver rose 1.3 percent to $16.32 per ounce. Prices touched a more than four-month low of $16.04 in the previous session.

Platinum was up 0.9 percent at $898.05 per ounce. The metal touched its lowest this year at $888.50 on Tuesday.

Palladium climbed 0.5 percent to $953.30 per ounce.

(Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu and Joseph Radford)