* Gold clings to biggest gain in nearly a month
* Traders await Fed statement at 1800 GMT
* Fed Chair Janet Yellen holds news conference at 1830 GMT
(Updates prices)
By A. Ananthalakshmi
SINGAPORE, Sept 17 (Reuters) - Gold was trading near its
highest in a week on Thursday, adding to overnight gains from
its biggest jump in nearly a month, as sluggish U.S. inflation
data eased fears the Federal Reserve would hike interest rates
later this session.
Spot gold XAU= had ticked up 0.2 percent to $1,120.95 an
ounce at 0638 GMT, near a one-week high of $1,124.30 reached in
the previous session. The metal gained 1.3 percent on Wednesday
in its biggest daily jump since Aug. 20.
"All eyes are on the Fed's interest rate decision later
today which is the most anticipated announcement in years by the
central bank," said James Cerisola, precious metals trader at
MKS Group.
"A short squeeze across the precious complex prior to the
FOMC caught the market off guard," he said, referring to the
Federal Open Market Committee.
Prices got help from data on Wednesday that showed U.S.
consumer prices unexpectedly fell in August. Softness in the
dollar, following the inflation data, also supported gold
prices.
Signs of a disinflationary trend reasserting itself are in
stark contrast with a fairly healthy economy and a rapidly
tightening labour market, and highlight the dilemma Fed
officials face as they contemplate raising interest rates for
the first time in nearly a decade.
The U.S. central bank kicked off a two-day policy meeting on
Wednesday, with a decision on interest rates expected at 1800
GMT on Thursday.
Expectations that the Fed would hike rates at this week's
meeting had already been lowered due to recent concerns over
slowing economic growth in China and volatility in financial
markets.
In a Reuters poll of 80 economists, 45 said the Fed would
keep its benchmark interest rate between zero and 0.25 percent,
while 35 expected a hike. ID:nL4N11L32T
The uncertainty over the timing of a rate hike has weighed
on gold all year. Higher rates could curb demand for
non-interest-paying bullion.
"If rates were to be raised, then it would be no surprise to
see gold prices sink quite quickly to $1,077," said Howie Lee,
an analyst at Phillip Futures.
On the other hand, if the Fed leaves rates unchanged, the
upside for gold prices would be limited as the move would create
more uncertainty over the timing of an eventual rate hike,
traders said.
Among other precious metals, silver XAG= was holding firm
at $14.90, following a 3.5-percent jump in the previous session,
its biggest one-day jump since May. Platinum XPT= rose for a
third straight session.
PRICES AT 0638 GMT
Metal Last Change Pct chg
Spot gold 1120.95 1.8 0.16
Spot silver 14.9 0.01 0.07
Spot platinum 970.5 2.26 0.23
Spot palladium 606.2 -2.8 -0.46
Comex gold 1120.6 1.6 0.14
Comex silver 14.915 0.03 0.2
Euro 1.13
DXY 95.293
COMEX gold and silver contracts show the
most active months