Gold edges up as investors weigh Fed hike outlook

By Eric Onstad

LONDON (Reuters) - Gold was a fraction firmer on Tuesday amid uncertainty about whether the U.S. central bank will hike interest rates next week, while the potential for more weakness in stocks offered support.

A policymaker of the U.S. Federal Reserve said on Monday the case for tightening was "less compelling", leading traders to trim the odds for a September rate hike to 15 percent from 24 percent on Friday, according to CME Group.

"We're treading water today after the bounce we received from the FOMC comments yesterday, but gathering from the limited impact we've seen, the market is still probably concerned about the potential for a rate hike later this month," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Spot gold was up 0.1 percent at $1,328.29 an ounce at 1030 GMT. U.S. gold futures gained 0.5 percent to $1,332.10 an ounce.

"We remain range-bound from $1,300 to $1,350, and the key today is to keep an eye on the stock markets. If they show a more of a corrective mode, we may find some additional support from that."

European shares rose on Tuesday to end a three-day losing streak following the Fed official's comments.

Spot gold may end its current bounce around resistance at $1,330 per ounce before resuming its downtrend, according to Reuters technical analyst Wang Tao.

"As the market reduces the likelihood of a near-term rate rise and if oil losses stabilize, gold prices should find a bottom, at least in the run up to the FOMC," HSBC analyst James Steel said in a note.

Oil fell on Tuesday following a series of gloomy predictions on demand growth that suggested the global overhang of unused inventories may persist for much longer than investors anticipate.

Spot silver climbed 0.3 percent to $19.12 an ounce, after hitting a more than over one-week low of $18.69 in the previous session.

Platinum added 0.1 percent to $1,055.60. It touched its lowest in more than two months at $1,033.45 on Monday.

Palladium rose 0.2 percent to $661.80. It hit a low of $650.15 Monday, a level not seen since July 20.

(Additional reporting by Nallur Sethuraman and Swati Verma in Bengaluru; Editing by Mark Potter)