* Gold bounces back after Friday's 1.3 pct drop
* Fed not expected to raise U.S. rates this week
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
(Updates prices; adds comment, second byline, NEW YORK
dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, April 25 (Reuters) - Gold rose on Monday as
a retreat in the U.S. dollar helped to tempt back some buyers
after the previous session's 1.3 percent slide, but moves were
muted ahead of a Federal Reserve policy meeting this week.
The Fed is not expected to raise interest rates at its April
26-27 meeting, but markets will be looking for the U.S. central
bank's take on the global economy and its monetary policy
outlook.
Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding non-yielding assets such as bullion,
while boosting the dollar, in which it is priced.
Spot gold XAU= was at $1,237.11 an ounce at 1340 GMT, up
0.4 percent, while U.S. gold futures GCv1 for June delivery
settled up 0.8 percent at $1,240.20.
Prices are up nearly 17 percent this year as expectations of
a Fed rate increase faded, the dollar softened and investors
showed renewed interest in commodities.
"It all depends on the Fed for the time being," Julius Baer
analyst Carsten Menke said. "Inflows into exchange-traded
products have really leveled off in the second half of March and
into April."
Global stocks, the dollar and oil prices fell as an
unexpected drop in U.S. new home sales added to investor
uncertainty over the economy's outlook ahead of U.S. and
Japanese central bank policy meetings. MKTS/GLOB
"We're in this narrow band somewhere between $1,200 and
$1,250. The market is really looking for guidance here," said
Stefan Wieler, vice president of GoldMoney in Toronto.
"The gold market has anticipated that real interest rates
move lower."
Economists expect the Fed to deliver a rate increase in June
and follow up with another by the end of the year. But interest
rate futures show less conviction, underscoring the wide gap
between markets and policymakers on the path of rates.
Speculators continue to bet on rising gold prices, with
Friday's data showing that hedge funds and money managers raised
their net long COMEX gold position to a 3-1/2-year high.
"With expectations of a Fed hike in the next six months
already low, the market already heavily long and physical demand
muted, we see little reason to jump in and buy gold here," ICBC
Standard Bank said in a note.
Among other precious metals, silver XAG= , which touched an
11-month high as it rallied 4.5 percent last week, was up just
0.1 percent at $16.95 an ounce.
Platinum XPT= was up 0.6 percent at $1,012.13 and
palladium XPD= gained 0.1 percent to $600.95.
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