* Fed statement due at 2 p.m. EST, 1900 GMT
* Dollar, U.S. yields fall after weak inflation data
* Democrat win in Alabama endangers Trump tax cuts
* Global shares near record highs (Recasts, updates prices; adds comment, adds NEW YORK dateline)
By Renita D. Young and Peter Hobson
NEW YORK/LONDON, Dec 13 (Reuters) - Gold prices hovered near their lowest in nearly five months on Wednesday as investors awaited an expected U.S. interest rate increase and clues from the U.S. Federal Reserve on its plans for further hikes next year.
Spot gold XAU= was up 0.29 percent at $1,247.11 an ounce by 1:36 p.m. EST (1836 GMT). On Tuesday it touched $1,235.92, the lowest since July 20.
U.S. gold futures GCcv1 for February delivery settled up $6.90, or 0.6 percent, at $1,248.60 per ounce.
The Fed is widely expected to raise benchmark interest rates by 25 basis points in its statement due at 2 p.m. EST (1900 GMT). Fed Chair Janet Yellen will give a news conference a half hour later, her last before her four-year term ends early next year.
"[Today's rate increase] will have a modest negative effect on gold prices. We've moderated and lowered our projections for the gold price next year as a result of the economies in most parts of the world and the stock market stronger than people have thought," said Jeffrey Christian, managing partner of CPM Group in New York.
Gold is sensitive to rising rates because they push up bond yields, reducing the appeal of non-yielding bullion. Rising interest rates also tend to boost the dollar, making gold more expensive for holders of other currencies.
Analysts at ScotiaMocatta said momentum indicators showed gold could reach its July low of $1,204.90.
However, if gold rallies along with the expected 25 basis point interest rate hike, "it shows participants feel that 25 basis point hike is not quite enough at the exact moment," said Michael Matousek, head trader at U.S. Global Investors in San Antonio.
The Fed has increased rates twice this year and is expected to raise them three more times in 2018.
Meanwhile, the U.S. dollar and U.S. yields fell after data showed sluggish growth in consumer prices, contradicting signs that inflation may be firming and suggesting the Fed may raise rates more slowly next year. shares were close to record highs, continuing a rally that has attracted investment away from gold. MKTS/GLOB
In other precious metals, silver XAG= was up 0.9 percent at $15.86 an ounce after hitting a five-month low of $15.59.
Platinum XPT= was up 0.1 percent at $877.50 an ounce after touching its lowest since February 2016 at $868.80 on Tuesday.
Palladium XPD= was up 0.2 percent at $1,014.40 an ounce.