* FOMC two-day policy meeting starts later in the day
* Gold touches weakest since June 2
* Palladium hovers near 16-year high hit last week
By Nithin ThomasPrasad
BENGALURU, June 13 Gold held steady on Tuesday
as investors remained cautious ahead of a two-day U.S. Federal
Reserve meeting that is likely to provide hints on the central
bank's interest rate policy for the remainder of the year.
The Fed is widely expected to hike interest rates during the
policy meeting beginning Tuesday, but the focus is on whether
the central bank thinks the U.S. economy is robust enough to
withstand further rate increases through 2017.
"If they are not hawkish, gold could be stable for a little
while because there seems to be a bit too much longs in the
market," said Ronald Leung, chief dealer at Lee Cheong Gold
Dealers in Hong Kong.
While a rate hike in the meeting is a given, people are
waiting to hear if the Fed could raise rates again in September
or any other time, Leung noted.
Spot gold was down 0.1 percent at $1,264.01 per ounce
at 0805 GMT. Earlier in the session, it hit a low of $1,262.61,
its weakest since June 2.
U.S. gold futures for August delivery dropped 0.2
percent to $1,266.30.
"While the market broadly expects another two hikes in rates
in 2017, the tone of the FOMC (Federal Open Market Committee
meeting) could set the stage for further weakness in the short
term," ANZ bank said in a note.
Higher rates could boost the dollar, making commodities
priced in the greenback more expensive for holders of other
"Depending on the central bank's wording, market reaction
could be intense and so we would rather watch the action from
the sidelines for the time being," said INTL FCStone analyst
Edward Meir, adding that they remained neutral on gold, heading
into the meeting.
Among other precious metals, palladium hovered near
the 16-year high hit on Friday, and was last seen up 0.4 percent
to $899.25 an ounce.
Silver slipped 0.3 percent to $16.87 per ounce. In
the previous session, it slid 1.4 percent to its biggest one-day
percentage decline since May 18. The metal hit a three-week low
of $16.80 an ounce on Monday.
Platinum climbed 0.2 percent to $938.50 per ounce.
(Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by Sunil Nair and Sherry Jacob-Phillips)