* Spot gold <XAU=> holds near last week's 18-month high
* Dealers wary of liquidation on COMEX holdings
* Main consumer India buys gold during festive season
(Changes dateline, byline, adds quotes, updates prices)
By Veronica Brown
LONDON, Sept 23 (Reuters) - Gold held steady on Wednesday,
near last week's 18-month high and supported by dollar weakness,
but gains were capped by discomfort over the extent of long
positioning in futures markets and risk of liquidation.
Spot gold stood at $1,013.00 an ounce by 1012 GMT, compared
with $1,013.80 late in New York on Tuesday <XAU=>. Prices remain
within striking distance of last week's 18-month high at
$1,023.85 and the March 2008 historic peak at $1,030.80.
Gold and other markets, including stocks and currencies, are
trading cautiously on Wednesday ahead of the U.S. Federal
Reserve's rate decision later in the day, with investors looking
to see if the central bank repeats its intention to keep
borrowing costs exceptionally low for an extended period.
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Any resulting dollar weakness would boost gold's chances of
trying to reach the record levels but as speculators hold record
long positions -- buying to profit from upward price moves -- on
the COMEX gold futures market, current price action is seen
raising the possibility of a brutal bout of selling.
"As long as the dollar remains weak, gold can maintain its
momentum. But because speculative interest is so high and ETF
holdings are at record highs as well, any negative factors that
play through could more emphasised in terms of downward
movement," Barclays Capital analyst Suki Cooper said.
Last year, bullion lost more than $100 only a few days after
it powered to the record high.
PHYSICAL BUYERS HESITATE
On currency markets, the dollar eased against a basket of
currencies including the euro to 76.018 <.DXY>. The index has
shed around 2.7 percent this month. A weaker dollar makes
dollar-denominated commodities more attractive for non-U.S.
investors.
U.S. gold futures for December delivery <GCZ9> added $1.50
an ounce to $1,017.00 on the COMEX division of the New York
Mercantile Exchange, having hit an intraday high of $1,020.40.
The physical sector saw buying from main consumer India, but
other consumers were hesitant.
"India continues to buy but I guess other consumers are
quite cautious this time around. I don't think people dare to
cash in right now especially after the market has bounced back
from below $1,000," said a dealer in Singapore.
India's gold purchases have picked up as the festive season
gained steam in the world's largest consumer.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust, said its holdings stood at 1,101.735 tonnes as
of Sept. 22, unchanged from the previous day.
ETF Securities said the amount of metal it holds to back its
gold and ETFS Physical Palladium <PHPD.L> exchange-traded
commodities rose to record highs in the week to Sept. 22.
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(Additional reporting by Lewa Pardomuan in Singapore)
(Reporting by Veronica Brown; Editing by Anthony Barker)
