* Gold boosted as dollar feels pinch ahead of FOMC
* Fed expected to pour cold water on rate hike expectations
* Short covering supports gold, technically vulnerable
By Nick Vinocur
London, June 24 (Reuters) - Gold rose above $930 per ounce
on Wednesday, gathering strength as the dollar prolonged its
downward slide against major currencies on expectations that the
U.S. Federal Reserve will not rush to raise interest rates.
The metal extended its gains in London after hitting a
six-week low of $912.90 on Monday, with the dollar retreating
further against major rivals <.DXY> -- making bullion and other
commodities priced in the U.S. currency more appealing to
non-U.S. investors.
Spot gold <XAU=> rose to $929.60 an ounce by 1019 GMT, up
almost half a percent from $925.15 quoted late in New York on
Tuesday. It earlier hit a high of $930.35.
The Fed is expected to emphasise that the U.S. economy
remains in a vulnerable position, despite some reassuring signs,
when it publishes its post-meeting statement later on Wednesday.
[]
Analysts said that short-covering would probably boost
bullion, while gathering uncertainty about the pace of global
economic recovery was also supportive to its role as a hedge
against such jitters.
"The weaker dollar is helping today,...and people are
becoming more nervous about the state of the financial
landscape," said Robin Bhar, an analyst at Calyon.
"There was a feeling that the Fed would have to tighten
(rates) a lot sooner, but investors are perhaps reassessing
their view of the timing of rate increases. And that, of course,
would help gold," he added.
Higher U.S. borrowing costs traditionally raise the allure
of U.S. assets including the dollar, thus pressuring gold.
INFLATION WORRIES RECEDE
In other precious metals, spot silver <XAG=> firmed to
$13.93, up slightly from $13.82 quoted late in New York on
Tuesday, while platinum <XPT=> rose to $1,167.50 from $1,158 and
palladium <XPD=> gained to $237.00 from $233.50.
Inflation expectations also receded after the chief
economist of the International Monetary Fund said that the
recent rebound in oil prices had been largely driven by
speculators without support from real demand. []
Oil was down 54 cents at $68.70 per barrel <CLc1>.
U.S. gold futures for August delivery <GCQ9> rose more than
half a percent to $929.80 per ounce since Tuesday's settlement.
Investor interest in gold-backed exchange-traded funds, which
are designed to closely reflect the price of an underlying market
such as gold, has fallen recently as gold retreated from a
three-month high of $989 per ounce in early June.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings were 1,131.24 tonnes on
June 23, unchanged from the previous business day. []
The holdings are down 0.2 percent from the record high of
1,134.03 tonnes reported on June 1.
Some analysts said that even though the market was
continuing to push higher for now, the rally was beginning to
show signs of fatigue with the uptake of long positions on the
COMEX futures market looking stale.
"I would not be surprised to see gold move a bit lower as
there's too much long positioning in the market and some of it
needs to be cleared out," said Afshin Nabavi, analyst at MKS
Finance.
"From there, we could go back up towards the $1,000, $1,000+
mark. But for the immediate future we could test support around
$850."
(Additional reporting by Miho Yoshikawa in Tokyo and
Veronica Brown in London)
(Reporting by Nick Vinocur; Editing by Keiron Henderson)
