* Investors cash in gains after rally to $1,127.80/oz
* Fed says closely monitoring global economy
* UBS forecasts silver to fall to $12/oz in 3 months
(Updates prices; adds comment, second byline, NEW YORK
dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Jan 28 (Reuters) - Gold fell by 1 percent
on Thursday, pressured by earlier strength in equity markets on
the back of a rally in oil prices, with bullion investors quick
to cash in gains from the Wednesday's rally to 12-week highs.
World stock markets were mixed after Wall Street indexes
came off their highs and the dollar slipped on bets that U.S.
interest rate hikes would be more gradual than the Federal
Reserve has suggested. MKTS/GLOB
Spot gold XAU= was down 0.9 percent at $1,115.36 an ounce
at 3:09 p.m. EST (2009 GMT), off a session low of $1,111.56.
U.S. gold futures GCG6 for February delivery settled down 20
cents at $1,115.60 an ounce.
"The initial equity rally generated enough demand for
riskier assets that it choked off the oxygen that gold needs to
keep going higher," said James Steel, chief metals analyst for
HSBC Securities in New York.
"The FOMC was positive for gold but I don't think that
necessarily carried into today's trading."
Gold leapt to a 12-week high of $1,127.80 an ounce late on
Wednesday after the Fed kept interest rates unchanged and said
it was "closely monitoring" global economic and financial
developments, while keeping an optimistic view of the U.S.
economy.
"(Gold) did jump very much higher overnight, so we're seeing
some selling into that rally right now," Mitsubishi analyst
Jonathan Butler said. "We're getting up towards the $1,130 level
and there's some fairly significant technical resistance once we
get up to $1,136."
Higher rates lift the opportunity cost of holding
non-yielding bullion, while boosting the dollar, in which it is
priced.
"If investor sentiment deteriorates, lower yielding assets
are in demand, gold being one of them," ABN Amro said in a
report.
Gold prices moved in the opposite direction of oil, which
soared as much as 8 percent after a Russian official said Saudi
Arabia has proposed that oil-producing countries cut production
by up to 5 percent each. Prices later pared losses. O/R
Among other precious metals, UBS Wealth Management said in a
note that it remained bearish on silver prices, forecasting they
will fall to $12 an ounce in three months but rebound to $14.50
in 12 months.
Spot silver XAG= was down 1.6 percent to $14.24 an ounce
and platinum XPT= was down 1.9 percent at $863.31 an ounce.
Palladium XPD= was down 1.8 percent at $488.20 an ounce.
The official London benchmark price for silver settled on
Thursday more than 80 cents below the spot price.