Gold rises to near 2-week high as U.S. rate hike fears ease

SINGAPORE (Reuters) - Gold climbed to its highest in nearly two weeks on Thursday as expectations of an early hike in U.S. interest rates eased and the dollar lost traction after the release of minutes of the last Federal Reserve policy meeting.

FUNDAMENTALS

* Spot gold rose to $1,223.61 an ounce early on Thursday, before paring gains to trade down 0.2 percent at $1,219.30 by 0036 GMT. The metal had risen for three days in a row before Thursday.

* U.S. gold futures jumped over 1 percent to $1,224.30 - also close to a two-week peak, while silver futures rose nearly 2 percent.

* Fed officials want to tie an interest-rate rise to U.S. economic progress, but the minutes of their last policy meeting show they are struggling with how to come to grips with the dual threats of a stronger dollar and a global slowdown.

* The minutes of the Sept. 16-17 meeting, released on Wednesday, expressed concern the rising dollar could slow a needed rebound in inflation, and also highlighted economic turmoil in Europe and Asia.

* The minutes prompted investors to bet that the Fed is in no rush to tighten after years of monetary stimulus.

* The U.S. dollar, which has risen in the last 12 weeks, hit a two-week low, boosting gold's appeal.

* Bullion investors had feared that strong U.S. economic data would prompt the Fed to boost rates soon, a move that would dent demand for non-interest-bearing gold.

* Despite the uptick in gold prices this week, sentiment remained bearish as gold remains close to the key $1,200-an-ounce level.

* Holdings in SPDR Gold Trust, the world's top gold-backed exchange-traded fund and a good proxy for market sentiment, fell 5.38 tonnes to 762.09 tonnes on Wednesday -- the lowest since December 2008.

MARKET NEWS

* U.S. stocks soared and the dollar fell on Wednesday on a wave of investor relief after the Fed said it does not plan to hike interest rates before the economy can support an increase.

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