Gold holds near 1-month low ahead of Fed meeting

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold steadied near a one-month low on Tuesday as investors kept to the sidelines, waiting for the Federal Reserve's outlook this week on U.S. interest rates.

Spot gold was little changed near $1,108.20 an ounce by 0633 GMT, just above a one-month low of $1,098.35 reached last week. U.S. gold was trading at $1,107.60.

Investors are waiting for a statement from the Fed on Thursday, following a two-day policy meet, to see whether the U.S. central bank will raise rates for the first time in nearly a decade.

Expectations that the Fed will hike rates this week have eased recently due to concerns over slowing economic growth in China and volatility in financial markets.

But traders warned gold was unlikely to make a significant move before the Fed decision.

"If the Fed happens to keep rates on hold, gold will likely find a bid," said MKS Group trader Jason Cerisola, adding that prices could face resistance at $1,154 and $1,170 on the move higher.

A rate hike would be a clear impetus for a drop to below $1,100, said analysts at OCBC Bank.

"Even if a rate hike does not materialise this week, the cards for a rate hike in subsequent FOMC meetings are still on the table, and thus explaining a general cautiousness on gold prices for the year ahead," they said.

Higher rates could dent demand for non-interest-paying bullion, while boosting the dollar.

Lack of clarity over the timing of a rate hike has weighed on gold all year, sending it down over 6 percent.

PIMCO, one of the world's largest asset managers and advised by former Fed chairman Ben Bernanke, puts a "below 50 percent chance" the Fed will raise short-term interest rates this week, Chief Investment Officer Dan Ivascyn told Reuters on Monday.

A small majority of forecasters are sticking to their guns and predicting the Fed will pull the trigger this week.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford and Subhranshu Sahu)