Gold slips on nerves ahead of Fed chair decision

By Eric Onstad

LONDON (Reuters) - Gold dipped on Tuesday as investors nervously awaited news on the new head of the U.S. central bank while strong share markets and a calmer geopolitical environment sapped safe-haven demand.

"The hawkish speculation about a new Fed chair has added some downside pressure," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

President Donald Trump told reporters on Monday he is "very, very close" to making his decision on who should chair the U.S. Federal Reserve.

A hawkish candidate would be expected to favour higher interest rates, boosting the value of the dollar and making the greenback-denominated metal more expensive for holders of other currencies.

Spot gold slipped 0.3 percent to $1,277.51 an ounce by 1250 GMT, after hitting its lowest since Oct. 6 at $1,271.86 in the previous session.

U.S. gold futures for December delivery fell 0.2 percent to $1,278.90 per ounce.

Spot gold has shed 6 percent since touching a 1-year high of $1,357.54 on Sept. 8, largely due to a rebound in the dollar on expectations that the Fed will boost interest rates in December.

The Fed will raise rates in December and twice next year, according to a Reuters poll of economists, who now worry that the central bank will slow its tightening because of expectations that inflation will remain low.

"Stocks, even though we had a correction yesterday, are holding near record highs, removing some of the demand on that front. Geopolitics have faded a bit recently and that has added to the downwards move," Hansen added.

MSCI's 47-country world share index hovered near its recent all-time highs after a drop in General Electric shares on Wall Street had seen the ViX volatility index spike up.

"I'm very surprised we're up here. Risk is still on if you look at stock markets. Generally gold should be lower ... I was expecting gold to drift down to $1,260 area," said the Hong Kong-based trader.

"We'll probably consolidate around $1,275-$1,285 until some Fed news comes out."

In other precious metals, silver fell 0.5 percent to $16.96 an ounce after hitting its lowest since Oct. 9 in the previous session.

Platinum gained 0.1 percent to $922.30 an ounce while palladium dipped 0.1 percent to $958 an ounce.

"I think there's still belief in the market that palladium can continue to outperform," Hansen said.

"If we see the (palladium-platinum) spread widen above $50 then we could probably see another extension up towards the $75 area."

Palladium has more than doubled in value since touching a 5-1/2 year low in January last year while platinum has only gained 15 percent in the same period.

(Additional reporting by Apeksha Nair in Bengaluru, editing by David Evans)