* Fed verdict seen as crucial for sentiment
* Chinese monetary policies worry; Toyota recall weighs
(Recasts, adds comments/details, changes dateline pvs TOKYO)
By Michael Taylor
LONDON, Jan 27 (Reuters) - Gold prices eased slightly on
Wednesday as the dollar firmed a touch versus the euro, as
investors shied away from riskier assets on concerns about China
tightening lending and ahead of a U.S. interest rate decision.
The Fed ends a two-day meeting on Wednesday, which is
expected to yield little in terms of a policy shift, but comes
as the market waits to see if Chairman Ben Bernanke will be
confirmed in the post for a second term. []
Gold <XAU=> was bid at $1,094.70 an ounce by 1038 GMT,
against $1,097.25 an ounce in New York late on Tuesday. Last
week, the yellow metal touched a one-month low at $1,081.90.
U.S. gold futures for February delivery <GCG0> were at
$1,094.70 per ounce, down 0.3 percent.
"The dollar is stronger today, and that is keeping precious
under pressure," said David Thurtell, an analyst at Citigroup.
"Also, a little bit of de-risking in there too."
A firmer U.S. currency makes metals priced in dollars more
expensive for holders of other currencies.
"China monetary tightening talk is the big one but also
Obama talking about budget cuts and tying down the banks on what
they can do, is all pretty negative," said Thurtell.
China's credit-tightening steps and President Barack Obama's
plans to limit banks' risk taking have dampened confidence about
an economic recovery in the past few weeks, helping investors
shift back to the dollar from riskier assets, including
commodities.
Obama's State of the Union speech is also due on Wednesday.
[]
FOMC CRUCIAL
But crucial to sentiment will be the Federal Open Market
Committee (FOMC), which ends a two-day meeting, with
policymakers expected to keep interest rates near zero and
indicate whether they will stick to plans to wind down an
emergency asset purchase programme by March. []
"The market has been building a base for the next move and
we expect things to get more exciting," said Andrey Kryuchenkov,
an analyst at VTB Capital. "Volatility will pick up, while later
today all focus will be on the Fed statement."
Palladium prices fell more than 2 percent, sliding further
from the 19-month highs of $471.75 per ounce they hit last week
when investment demand fuelled by the recent launch of
exchange-traded funds in the United States boosted prices.
Palladium <XPD=> was at $415.50 an ounce, versus $425 late
in New York on Tuesday. Spot platinum <XPT=> was bid at $1,514
per ounce, against $1,532.50.
Also weighing on sentiment was news that Toyota Motor Corp
<7203.T>, the world's biggest automaker, is to suspend U.S.
sales of eight models subject to a massive safety recall.
[]
Platinum and palladium are highly exposed to the auto sector
as they are chiefly used by carmakers as a component in
catalytic converters. "If you are looking for excuses to sell
short term, this is another one," said Citi's Thurtell.
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings stood at 1,111.922 tonnes as
of Jan. 26, unchanged since Jan. 19. []
Among other precious metals, silver <XAG=> prices were at
$16.64 an ounce versus $16.72 an ounce late on Tuesday.
(Additional reporting by Risa Maeda in Tokyo; editing by sue
Thomas)
