Gold dips to six-week low on firm dollar ahead of U.S. Fed meet

By Eileen Soreng

BENGALURU (Reuters) - Gold prices fell to a six-week low on Tuesday as the dollar firmed near 3-1/2-month highs, with investors awaiting direction on U.S. monetary policy from the U.S. Federal Reserve.

Spot gold was down 0.3 percent at $1,310.77 per ounce at 0716 GMT. Prices hit $1,310.01 earlier in the session, their lowest since March 21.

U.S. gold futures for June delivery declined 0.5 percent to $1,313.10 per ounce.

"The recent U.S. dollar revival has negatively impact gold as the intensity of the USD correction has caught most traders by surprise," said Stephen Innes, APAC trading head at OANDA.

The dollar index edged up 0.1 percent to 91.961 as investors awaited the Fed's policy decision and key employment data due this week for fresh clues on the strength of the U.S. economy.

While the U.S. central bank is widely expected to stand pat on policy, market participants will be closely watching the two-day meet concluding on Wednesday for hints of an interest rate hike in June. [USD/]

The greenback touched its highest since Jan. 11 at 91.986 on Friday. It climbed 2 percent in April, recording its biggest monthly gain since November 2016.

"Investor are also remaining cautious ahead of this week's two day FOMC meeting," said analysts at ANZ in a note.

Higher interest rates tend to boost the U.S. dollar and push bond yields up, pressuring gold prices by increasing the opportunity cost of holding non-yielding bullion.

"Support-wise (in gold), we are nearing some key technical levels with the 200 DMA at $1,304 and the psychological $1,300 level below that, expect broad support between $1,300 and the overnight low of $1,310," MKS PAMP said in a note.

Meanwhile, U.S. stock futures edged up and Australian shares hit seven-week highs after the United States extended the deadline for imposing steel and aluminium tariffs on imports from Canada, the European Union and Mexico, and offered permanent exemptions for several other allies.

Most markets in Asia are closed for a Labour Day holiday.

Among other precious metals spot silver fell 0.4 percent to $16.24 per ounce. Prices touched their lowest in about a month, at $16.18, in the previous session.

Platinum was down 0.2 percent at $901.50 per ounce. Prices fell to $896.50 earlier in the session, their lowest since Dec. 18, 2017.

Palladium fell 0.7 percent to $958.00 per ounce. Prices touched a near three-week low of $955.72 earlier in the day.

(Reporting by Eileen Soreng in Bengaluru; Editing by Tom Hogue and Vyas Mohan)