* European stocks and oil tick higher, dollar retreats
* Coming up: Start of Fed two-day policy meeting
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
(Updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, April 26 (Reuters) - Gold retreated on Tuesday as a
rebound in assets viewed as higher risk, such as oil and stocks,
diverted some attention from the metal, though prices remained
hemmed into a narrow range ahead of a U.S. Federal Reserve
policy meeting.
The Fed is expected to hold interest rates steady at the
meeting starting on Tuesday, but traders will be watching for
changes to its assessement of the U.S. economy, which could
point to more rate increases later in the year.
Spot gold XAU= was down 0.2 percent at $1,234.81 an ounce
at 0930 GMT, while U.S. gold futures GCv1 for June delivery
were down $3.60 at $1,236.60.
"Markets are not expecting the Fed to move, but there will
be a lot of focus on the tone of the statement," UBS precious
metals strategist Joni Teves said.
"Any continuation of the Fed's dovish tone should continue
to underpin gold. Also, we have the Bank of Japan (policy
meeting) shortly afterwards, and if both central banks sound
dovish, that will feed into this easy policy world that gold
investors have been zeroing in on this year."
Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding non-yielding bullion, while boosting
the dollar, in which it is priced.
The metal has risen 16 percent this year, chiefly on
expectations that the Fed would hold off raising rates further
after its first increase for nearly a decade in December.
Economists expect a Fed increase in June, with another by
year-end. But interest rate futures show less conviction,
underscoring the gap between markets and policymakers on the
trajectory of rates.
Supporting gold, the dollar came under pressure from a
recovery in the beleaguered yen as prospects of more monetary
stimulus from the Bank of Japan remained unclear. FRX/
However, European shares rose half a percentage point on
Tuesday and oil prices ticked higher, pointing to sharper
appetite for higher-risk assets at the potential expense of
gold. MKTS/GLOB
Holdings of the world's largest gold-backed exchange-traded
fund -- New York-listed SPDR Gold Shares GLD -- fell 0.3
percent to 802.65 tonnes on Monday. They reached a two-year high
earlier this year but have since plateaued. GOL/ETF
"Comex is heavily long and gold ETFs have stabilised. This
may indicate limited investment demand going forward," HSBC said
in a note.
Among other precious metals, silver XAG= rose 0.2 percent
to $17.02 an ounce, platinum XPT= gained 0.2 percent to
$1,013.10 and palladium XPD= fell 0.6 percent to $597.22.
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GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
PREVIEW-Fed seen holding rates this week with hike still on
horizon
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