* Gold rallies; last at $917.70/oz <XAU=>
* SPDR gold ETF holdings <XAUEXT-NYS-TT> ease slightly
* Market eyes FOMC meeting for clues on fiscal policy
By Veronica Brown and Nick Vinocur
LONDON, June 23 (Reuters) - Gold rallied from a six-week low
hit earlier on Tuesday, moving toward $920 per ounce, with
currency fundamentals proving the dominant factor as the dollar
got stung by concerns over U.S. indebtedness.
Spot gold <XAU=> stood at $917.70 per ounce by 1454 GMT,
having earlier hit a six-week low at $912.90 in Asian trade.
That compared with $921.90 quoted late in New York on Monday.
Traders said that bullion prices, after hitting three-month
highs recently, just shy of $1,000 an ounce, were due for the
falls seen in recent days as speculators cleared out stale long
positions.
But the metal's role as a hedge against jittery sentiment in
other asset classes proved supportive, with investors shifting
into risk-averse gear as they waited for clues on fiscal policy
from the U.S. Federal Reserve.
"We are seeing quite a lot of nervousness in the market,"
said James Moore, analyst at TheBullionDesk.com.
"There are a lot of concerns about the long term impact of
quantitative easing, and until we see a clear indication as to
the Fed's stance on fiscal policy, it will be a bit of a game of
wait-and-see."
Concerns about reserve diversification away from U.S. assets
caused the dollar to turn lower against the euro ahead of the
Federal Reserve's monthly meeting, after Moody's said one risk
to the U.S.' triple-A rating is if the dollar is challenged as
the main reserve currency. [].
The dollar extended losses after U.S. existing home sales
rose at a slower clip than expected in May. A weaker dollar
makes metals and other commodities priced in the U.S. unit
cheaper for non-U.S. investors.
INVESTOR CAUTION
U.S. gold futures for August delivery <GCQ9> fell slightly
to $917.80 per ounce on Monday on the COMEX division of the New
York Mercantile Exchange.
Overall investor caution was stirred by the World Bank on
Monday, which said prospects for the global economy remained
"unusually uncertain" as it cut 2009 growth forecasts for most
economies.
"Investor risk appetite has lost forward momentum as the
market begins to question the extent to which the green shoots
of the financial risk rally have roots in the real economy,"
Tullet Prebon said in a note to clients.
"There is nothing like a 3.1 percent drop in the S&P on a
day to get the bears out of the woods..., but the joke aside it
is beginning to look like those who hoped for a V-shaped
recovery will find that we are looking at the tail end of it."
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings fell to 1,131.24 tonnes
as of June 22, down 0.91 tonnes from the previous business day.
[]
It was the first change in the holdings since June 5. The
holdings hit a record 1,134.03 tonnes earlier in the month.
In other metals, silver slipped to $13.64 <XAG=>, from
$13.72 quoted late in New York on Monday. Platinum <XPT=> rose
slightly to $1,153.50 from $1,159.50, while palladium <XPD=>
stood at $231.00 from $232.00.
(Reporting by Veronica Brown and Nick Vinocur; Editing by
Pratima Desai)
