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PRECIOUS-Gold gains lustre as investors bet on Fed caution

(Updates prices, adds fresh comments and details)

* Fed policy statement due at 1900 GMT

* SPDR gold holdings climb to 4-month highs

By Arijit Bose

BENGALURU, Dec 19 (Reuters) - Gold scaled a more thanfive-month peak on Wednesday, bolstered by increasingexpectations the U.S. Federal Reserve would tone down its stanceon monetary tightening for the next year.

Having posted gains for two consecutive sessions, gold XAU= rose 0.4 percent to $1,254.76 per ounce at 10:47 a.m. EST(1547 GMT). The metal earlier hit $1,258.03, its highest sinceJuly 10.

U.S. gold futures GCv1 rose 0.4 percent to $1,258.80 perounce.

"The consensus seems to be that the Fed will undertake onerate hike today and back off on further hikes for the next year,which will be supportive for gold," said Bob Haberkorn, seniormarket strategist at RJO Futures.

"Once we get through the Fed, 2019 is a perfect storm forprecious metals."

Adding to gold's appeal was a weaker dollar, with the U.S.unit pressured by bets that the Fed would hint at plans to reinin interest rate hikes for 2019/2020. USD/

A Reuters poll earlier showed risks of a U.S. recession inthe next two years rising to 40 percent, inducing a significantshift in expectations that the Fed will introduce fewer interestrate hikes next year.

Market participants were braced for a rate decision by thecentral bank at 2 p.m. EST (1900 GMT) after its final two-daypolicy meeting of the year.

"Gold has already priced in a rate hike today, if they don'thike today it will easily go up by $20," Haberkorn said.

Holdings of the SPDR Gold TrustGLD , the world's largestgold-backed exchange-traded fund rose 1.1 percent to 771.79tonnes on Tuesday, the highest since Aug. 20, indicatingrejuvenated investor sentiment for the metal. GOL/ETF

Meanwhile, spot palladium XPD= rose 2 percent to $1,268.50per ounce, just below a record high of $1,269.50 hit earlierthis week.

"The ability of the market to come back after selloffsreaffirms its underlying tight fundamentals and we expectpalladium will move higher after the FOMC (Federal Open MarketCommittee meeting) is out of the way," HSBC analyst James Steelwrote in a note on Dec. 18.

Silver XAG= gained 0.8 percent to $14.76, while platinum XPT= rose about a percent to $794.50 an ounce. (Reporting by Arijit Bose in Bengaluru; Editing by BernadetteBaum) ((Arijit.Bose@thomsonreuters.com; Within U.S. +1 651 848 5832,Outside U.S. +91 8067495254; Reuters Messaging:Arijit.Bose.thomsonreuters.com@reuters.net))


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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