Gold extends gains as dollar drops ahead of BOJ, Fed

SINGAPORE (Reuters) - A weaker dollar helped gold extend gains into Tuesday, with investors adjusting positions ahead of policy meetings this week at the Bank of Japan and the U.S. Federal Reserve.

FUNDAMENTALS

* Spot gold had edged up 0.1 percent to $1,238.76 an ounce by 0051 GMT, after gaining 0.5 percent in the previous session.

* The U.S. dollar slipped against the yen on Monday as traders took profits from the greenback's recent rally against the Japanese currency, while the dollar weakened against other major currencies on expectations for a dovish Fed.

* Speculation of further easing sent the yen reeling late last week, but uncertainty over whether the BOJ will actually deliver fresh stimulus at its April 27-28 meeting saw the Japanese currency recover some ground on Monday.

* The Fed also holds a policy meeting this week, with the two-day gathering kicking off on Tuesday. The U.S. central bank is not expected to raise interest rates at the meeting, but markets will be looking for its take on the global economy and its monetary policy outlook.

* Economists expect the Fed to deliver a rate hike in June, and follow up with another by year-end. But interest rate futures show less conviction, underscoring an ongoing wide gap between markets and policymakers on the trajectory of rates.

* Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar.

* Assets in SPDR Gold Trust, the largest gold-backed exchange-traded fund, fell 0.3 percent to 802.65 tonnes on Monday, though remained not too far off a two-year high reached earlier this year.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)