Gold treads water near $1,160, Fed meeting in focus

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold steadied just above $1,160 an ounce on Tuesday as investors kept to the sidelines ahead of a Federal Reserve policy meeting that kicks off later in the session, waiting for clues on the timing of a U.S. rate hike.

Spot gold was steady at $1,163.71 an ounce by 0326 GMT. The metal had fallen to its lowest in nearly two weeks at $1,158.77 on Friday, but has since firmed as the dollar gave up some recent gains.

The dollar was lower on Tuesday, after data showed new home sales dropped steeply in September and on caution ahead of the Fed's two-day policy meeting.

The U.S. central bank is widely expected to leave rates unchanged but investors are increasingly sceptical that it will raise rates before the end of the year. The Fed holds one more policy meet this year in December.

Gold prices stabilised after last week's losses from weak housing data and a softer dollar, said HSBC analyst James Steel.

"Gold is receiving some oxygen from the investor uncertainty generated by the perceived divisions at the Fed," said Steel.

Fed policymakers have been worried about weakening global growth and a relatively strong dollar disrupting U.S. economic growth, but they have been sending out mixed messages regarding the timing of a rate hike, the first in nearly a decade.

Fed Chair Janet Yellen may need to adopt a stronger tone at this week's policy meeting if she expects to keep a December interest rate rise in play. Yellen's inclusive style has been tested recently by two fellow governors who publicly appeared to disagree with her view.

Global growth worries have prompted the market to push expectations for a rate hike to next year, though a few haven't completely ruled out a December rate hike.

Ultra-low rates boost the appeal of bullion, a non-interest-paying asset.

Technically, gold still appears to be testing correction levels with a key pivot seen at $1,156, ScotiaMocatta analysts said in a note.

"While that level holds we expect the bull trend to renew to the topside with $1,192 and $1,209 key target levels," they said.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford and Anand Basu)