* Gold recovers as oil firms, dollar slips from highs
* Traders cautious ahead of Fed rates meeting
* SPDR Gold Trust holdings rise 2 pct on Jun 23
(Recasts, updates prices, adds comment, changes dateline,
pvs SINGAPORE)
LONDON, June 24 (Reuters) - Gold recovered on Tuesday after
the previous session's sharp sell-off as oil rose for the third
straight day and the dollar eased from highs against the euro.
Rising crude prices typically underpin gold, which is often
bought as a hedge against oil-led inflation.
Gold <XAU=> rose to $888.20/889.20 an ounce at 0943 GMT from
$882.85/884.05 in the U.S. market late on Monday.
"We had a nice bounce as Europe opened. That was mostly
driven by crude, which jumped higher as we started trading,"
said Tom Kendall, an analyst at Mitsubishi.
"Certainly that bit of a recovery in the euro and easing
back in the dollar has helped as well," he added.
Bullion prices shed almost 3 percent on Monday to their
lowest level in nearly a week as a bounce in the dollar against
the euro sparked a spate of fund selling.
A stronger dollar often pressures gold, which is bought as
an alternative investment to the U.S. currency.
Rumours that a hedge fund liquidated about 2 million ounces
of gold also contributed to the losses, according to some
dealers.
Appetite for gold is muted, however, ahead of the
rate-setting meeting of the Federal Reserve starting Tuesday,
which is expected to give fresh impetus to the dollar.
Traders widely expect the Fed's Open Market Committee to
leave interest rates on hold at 2 percent. However, they will be
closely watching the FOMC's accompanying statement for clues as
to their future bias towards rates.
"Gold is likely to take its cue from the Fed
statement," said HSBC analyst Jim Steel in a note.
"Fed Chairman Ben Bernanke and other Fed officials stepped
up their flow of hawkish rhetoric in recent weeks, and it stands
to reason... that at least some of this rhetoric will appear in
this week's FOMC statement."
If the market takes the statement as a signal a hike in
rates is imminent, it could support the dollar, pressuring gold.
Investment demand remained firm on Monday, with the amount
of bullion held by the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust, rising by 2
percent or 12.26 tonnes to 628.21 tonnes.
However, the volume of silver held in the iShares Silver
Trust, the largest silver-backed ETF listed in the United
States, slipped by 46.2 tonnes, or three-quarters of one
percentage point, to 5,971.63 tonnes on Monday.
The fund's silver holdings are now at their lowest since May
13.
Spot silver <XAG=> edged up to $16.85/16.91 an ounce from
$16.72/16.80 late in New York.
Among other precious metals, spot platinum <XPT=> was little
changed at $2,035.00/2,055.00 an ounce from $2,033.50/2,053.50
late in New York.
"Near-term prices could remain under pressure as the weaker
German IFO confidence index alludes to a possibility of slower
European industrial demand," said Standard Bank analyst Manqoba
Madinane in a note.
"We expect prices to remain well supported between $2,024
and $2,010 today - with a primary resistance band developing
between $2,058 and $2,078."
Spot palladium <XPD=> firmed a touch to $466.00/474.00 an
ounce from $464.00/472.00.
(Reporting by Jan Harvey: Additional reporting by Raisssa
Kasolowsky: Editing by Peter Blackburn)
