Gold prices gain as dollar dips with Fed meet in focus

Gold prices edged higher on Monday, supported by a weaker dollar, as investors assessed some risk of aggressive rate hikes expected this week by major central banks especially the U.S. Federal Reserve to tame inflation.

FUNDAMENTALS

* Spot gold was up 0.2% at $1,677.89 per ounce, as of 0022 GMT. U.S. gold futures rose 0.2% at $1,686.50.


* The dollar index was down 0.2%, making bullion less expensive for overseas buyers.

* The U.S. Fed's Federal Open Market Committee is expected to begin its two-day meeting on interest rates on Sept. 20 and announce its decision the following day.

* Most of the banks meeting this week - from Switzerland to South Africa - are expected to hike, with markets split on whether the Bank of England will go by 50 or 75 basis points. 0#BOEWATCH

* Meanwhile, U.S. consumers' near-term inflation expectations fell to a one-year low in September, easing fears that the Fed could raise interest rates by a full percentage point next week.

* Gold is known as a safe investment amid inflation woes, but high interest rates increase the opportunity cost of holding non-yielding bullion.

* Physical gold demand picked up in India as domestic prices fell ahead of key festivals, while premiums in China climbed further as its currency weakened.

* Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.1% to 960.85 tonnes on Friday from 962.01 tonnes on Thursday.

* Speculators switch to net short position of 10,132 contracts in week to Sept. 13 in COMEX gold , while trimmed net short position in COMEX silver, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

* Spot silver gained 0.2% to $19.59 per ounce. Platinum fell 0.1% to $906.15 and palladium was down 0.2% at $2,129.55.

DATA/EVENTS (GMT)

No major data/events expected on Monday, Sept. 19