* Gold hits lowest since March 2 at $1,225.70 an ounce
* Longs unwind positions before outcome of Fed policy meet
* Dollar rebounds after falling vs yen on BOJ
(Updates throughout, changes dateline pvs SINGAPORE)
By Clara Denina
LONDON, March 15 (Reuters) - Gold fell to its lowest in
almost two weeks on Tuesday as the dollar firmed ahead of a
Federal Reserve meeting that is expected to give clues on the
pace of future U.S. rate rises.
Spot gold XAU= fell to $1,225.70 an ounce, its lowest
since March 2, in earlier trade and was down 0.2 percent at
$1,234.21 by 1038 GMT. U.S. gold futures GCcv1 slid 0.9
percent to $1,234.30 an ounce.
Worries about global growth and financial instability had
led investors to reprice prospects for increases in U.S. rates,
sending safe-haven gold to a 13-month high last week. But solid
readings more recently from U.S. data have rekindled market
expectations of further tightening this year.
"One difference from a few weeks ago is that the surprise
(from the Fed) would be a rate hike, whereas perhaps a few weeks
ago people thought a surprise would be a rate cut," Macquarie
analyst Matthew Turner said.
"There has been a shift towards hawkishness again, which is
probably pressuring gold a little bit."
The Fed begins its own two-day meeting on Tuesday.
Further U.S. rate rises could lift the opportunity cost of
holding non-yielding bullion.
The dollar rose 0.2 percent against a basket of main
currencies, having fallen versus the yen after the Bank of Japan
held policy steady as expected at the conclusion of its two-day
policy meeting.
Gold's weakness over the last two sessions followed Friday's
brief bounce to a 13-month high after the European Central Bank
signalled an end to rate cuts and the euro rose sharply versus
the dollar. Gold is highly sensitive to monetary policy and
resulting currency moves.
"A relatively deeper correction in the near term would serve
as a further test for gold positions that have been put on this
year," UBS said in a note.
"We expect the downside to be ultimately contained amid
signs that longs have more endurance and indications of lurking
interest to buy dips."
Holdings of the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell 1.08 percent to 790.14
tonnes on Monday from 798.77 tonnes on Friday. HLDSPDRGT=XAU
Spot silver XAG= rose 0.3 percent to $15.35 an ounce,
platinum XPT= was up 0.4 percent at $953.85 and palladium
XPD= lost 1.2 percent to $561.