* Gold up in choppy trade; dollar gyrates ahead of FOMC
* Fed expected to pour cold water on rate hike expectations
* Short covering supports gold, technically vulnerable
(Adds comments, updates prices)
By Nick Vinocur
LONDON, June 24 (Reuters) - Gold hit a six-day high of $942
per ounce on Wednesday, tracking a volatile dollar as investors
waited for the outcome of a U.S. Federal Reserve policy meeting
later in the day.
Spot gold <XAU=> briefly spiked to $942.20 in London before
paring gains to stand at $937.85 by 1445 GMT, up from $925.15
quoted late in New York on Tuesday.
The dollar had a bumpy ride, rising against major currencies
<.DXY> on talk that the Swiss National Bank was intervening on
currency markets to weaken the franc. Gains were cut after U.S.
durable goods data came in stronger than forecasts. []
Overall, the dollar is facing pressure on expectations that
the U.S. Federal Reserve would not be in a hurry to tighten
monetary policy, an outcome that would benefit gold.
Analysts said bullion had been boosted by short covering and
technical buying on the upward move, while bearish sentiment
about the pace of global economic recovery was also supportive.
"When the market broke above the $932 level, that triggered
some technical buying," said Walter de Wet, an analyst at
Standard Bank. "But we think that the upward momentum for gold
is not there at the moment, as some players in the physical
market are selling into this rally."
INFLATION WORRIES RECEDE
Worries that heavy government borrowing could boost
inflation receded on Wednesday after the International Monetary
Fund said the recent rebound in oil prices had been largely
driven by speculators, briefly driving oil lower.
Crude <CLc1> rose above $69 a barrel on Wednesday, supported
by news of a bigger-than-expected draw in U.S. crude oil stocks
and growing geopolitical troubles in some OPEC member countries.
The U.S. Federal Reserve was expected to play down talk of a
possible interest rate cut in its post-meeting statement to be
released later on Wednesday.
"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," said Robin Bhar, an
analyst at Calyon. "And that, of course, would help gold."
Higher U.S. borrowing costs traditionally raise the allure
of U.S. assets including the dollar, thus pressuring gold.
In other precious metals, spot silver <XAG=> firmed to
$14.10, up from $13.82 quoted late in New York on Tuesday, while
platinum <XPT=> rose to $1,172.50 from $1,158.00 and palladium
<XPD=> gained to $236.00 from $233.50.
U.S. gold futures <GCQ9> for August delivery rose 1.2
percent to $935.80 per ounce.
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, 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 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 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; editing by James Jukwey)
