PRECIOUS-Gold eases as dollar rebounds on rate rise expectations

* Dollar rebounds ahead of Fed
* Commodity weakness weighs on sentiment
* Crude oil near seven-year lows

(Adds comment, byline, NEW YORK dateline; updates prices)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Dec 10 (Reuters) - Gold edged lower on
Thursday and was vulnerable to further weakness as the dollar
rebounded and ahead of a widely anticipated U.S. interest rate
rise next week.
The Federal Reserve is expected to raise rates for the first
time in nearly a decade at its next policy meeting on Dec.
15-16. Higher rates should dent demand for non-interest-paying
gold, which has already lost 9 percent of its value this year
and is on track for its third year of losses.
Spot gold XAU= was down 0.1 percent at $1,071.96 an ounce
at 2:44 p.m. EST (1944 GMT), while U.S. gold futures GCcv1 for
February delivery settled down 0.4 percent at $1,072.50 an
ounce.
Bullion prices traded at the low end of the prior session's
range in quiet dealings ahead of next week's Fed meeting.
"Standing aside and being cautious is the prudent thing to
do," said David Morgan, founder of Silver-Investor.com in
Spokane, Washington.
The metal slid to $1,045.85, its lowest since February 2010,
last week, when the dollar spiked to its highest level in 12-1/2
years following Fed chair Janet Yellen's hint at a U.S. rate
rise this month.
"Although a U.S. rate hike should be priced in, gold's
initial reaction will be to the downside," Commerzbank (DE:CBKG) analyst
Daniel Briesemann said.
The dollar rose 0.6 percent against a basket of leading
currencies, while a slide in oil prices to a near-seven-year
low, added to pressure on gold. FRX/ O/R
Weakness in oil could trigger fears of deflation, a bearish
factor for gold, which is often used as a hedge against oil-led
inflation.
"Given the level of distress across the commodities complex,
it wouldn't be surprising to see a test towards the $1,000
level," ING Bank senior strategist Hamza Khan said.
In physical markets, gold premiums in India fell this week
but buying interest in China remained strong.
Silver XAG= fell 0.3 percent to $14.10 an ounce.
Platinum XPT= fell 0.1 percent to $855.95 an ounce, after
touching a seven-year low last week, and palladium XPD=
dropped 1.5 percent to $539.73 an ounce.
"Selling pressure from deleveraging and short selling,
combined with an absence of buying interest, seems to be behind
(platinum and palladium) price weakness as buyers have stepped
to the sidelines to buy on a hand-to-mouth basis," Scotiabank
said.
"Given the significant sell-off in prices in 2015, we
believe 2016 will see prices recover and that in turn is likely
to prompt bargain hunting and restocking."