* Gold supported by softer dollar, firm oil
* Strong physical, ETF interest emerges after price slip
* Caution remains watchword ahead of Fed decision
(Updates throughout)
LONDON, June 24 (Reuters) - Gold ticked higher on Tuesday as
the market took support from a softening of the dollar against
the euro, and as oil prices stayed firm.
Gold <XAU=> rose to $888.20/889.20 an ounce at 1402 GMT from
$882.85/884.05 in the U.S. market late on Monday.
The strong buying interest that supported gold after
Monday's price slide also cheered the market, analysts said.
"There is growing optimism that the inflows we are seeing
into exchange-traded funds and underlying physical demand are
actually improving," said Daniel Hynes, a metals strategist at
Merrill Lynch.
"That has been quite a strong support of prices at these
levels."
Bullion prices fell sharply on Monday as a bounce in the
dollar against the euro after weak euro zone data 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.
Nonetheless, gold ran into strong buying interest as it
slipped, with physical buyers in particular weighing into the
market as prices fell.
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust, said it added 12.26 tonnes of gold to
its holdings on Monday as prices fell, bringing them to 628.21
tonnes. []
"Investors viewed the price dip as a buying opportunity and
increased their exposure towards gold," analysts at Barclays
Capital said in a note.
Prices were relatively steady on Tuesday, with traders
cautious ahead of Wednesday's interest rates decision from the
U.S. Federal Reserve's Open Market Committee.
While traders expect the FOMC to leave interest rates on
hold at 2 percent, they will be closely watching the committee's
accompanying statement for clues as to their future bias towards
rates.
"The rate decision is not nearly as significant to
participants as what the post-meeting communique will contain,"
said Jon Nadler, a senior analyst at Kitco Bullion Dealers.
"Odds are still showing rate hikes in the equation, come
August and September."
If the market takes the statement as a signal a hike in
rates is imminent, it could support the dollar, pressuring gold.
Among other precious metals, spot silver <XAG=> edged up to
$16.81/16.87 an ounce from $16.72/16.80 late in New York.
The volume of silver held in the iShares Silver Trust
<SLV.A>, the largest silver-backed ETF listed in the United
States, slipped by 46.2 tonnes to 5,971.63 tonnes on Monday.
The fund's silver holdings are now at their lowest since May
13, and have slipped 1.5 percent from the all-time high of
6,063.96 tonnes they hit on June 16. []
"Silver prices have tracked gold prices closely and while we
expect this to broadly continue, we believe silver's weak
fundamentals will expose it to additional downside risk on any
dips in the gold price," said Barclays Capital.
Among other precious metals, spot platinum <XPT=> was eased
to $2,025.50/2,045.50 an ounce from $2,033.50/2,053.50 late in
New York.
Spot palladium <XPD=> firmed a touch to $467.00/472.00 an
ounce from $464.00/472.00.
(Reporting by Jan Harvey; editing by Christopher Johnson)
