PRECIOUS-Gold falls as expectation for U.S. rate hike looms

* Bullion down 10 percent so far this year
* Brokerages say gold to drop to or below $1,000
* Two-day Fed policy meeting ends on Wednesday

(Updates prices; adds comment, second byline, NEW YORK
dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Dec 14 (Reuters) - Gold fell 1 percent on
Monday ahead of a Federal Reserve policy meeting this week,
which is expected to announce the first interest rate rise in
nearly a decade.
Investors have been cutting gold positions in anticipation
of a rate increase and the metal has fallen about 10 percent so
far this year. Higher rates could dent demand for the
non-interest paying asset, while also boosting the dollar.
Spot gold XAU= eased 0.8 percent to $1,065.10 an ounce at
2:56 p.m. EST (1956 GMT), while U.S. gold futures GCcv1 for
February delivery settled 1.1 percent lower at $1,063.40 an
ounce.
"Gold's downtrend persists, with initial support around
$1,062-$1,063, a break of which could see prices back to their
December lows (at $1,045)," ActivTrades chief analyst Carlo
Alberto de Casa said.
Bullion prices held technical support just above $1,060, a
short-term Fibonacci retracement level from the Dec. 4 high to
the Dec. 3 low.
"It's coming into critical support. If it holds right here,
we can go higher," said Eli Tesfaye, senior market strategist
for brokerage RJO Futures in Chicago.
Meanwhile, spot silver XAG= hit its lowest since August
2009 at $13.60 an ounce.
"U.S. rates are going to move somewhat higher, the overall
environment is still one of sound growth in the States, there is
no inflation on the horizon at all, so from that prospective you
don't need any gold," Julius Baer analyst Carsten Menke said.
"We see prices moving sideways between $1,000 and $1,100
next year."
The Fed is expected to issue a post-meeting statement at 2
p.m. EST (1900 GMT) on Wednesday.
"The inevitability of the rate hike is here so it's an
accumulation of that," said Tesfaye about the reason for falling
gold prices.
"No risk is coming into this market."
Gold remained weak despite the turnaround of both the dollar
.DXY falling 0.4 percent against a basket of leading
currencies, and U.S. crude turning up after nearing 11-year
lows. O/R
Assets in the top gold ETF, SPDR Gold Trust GLD , are at
their lowest since September 2008 while physical demand from the
world's biggest consumer India was also lacking, with gold
prices there swinging to a discount. GOL/ETF
BofA Merrill Lynch said on Friday it expected the gold price
to slide to $950 early in 2016 due to the upcoming U.S. rate
rise, joining a chorus of other brokerages, including Goldman
Sachs, predicting a drop to, or below, $1,000.
Palladium XPD= rose 0.9 percent to $547.10 an ounce while
platinum XPT= was up 1 percent at $853.50 an ounce.