Gold muted despite weaker dollar as U.S Fed meeting looms

By Nakul Iyer

(Reuters) - Gold prices were subdued on Monday despite a pull back in the dollar, as traders looked ahead to a U.S. Federal Reserve policy meeting later in the week.

Spot gold was down 0.2% at $1,798.28 per ounce by 10:13 am EDT (1413 GMT), while U.S. gold futures also lost 0.2% to $1,798.10.

After closing back above the $1,800 level on July 7, gold has been caught in a narrow trading range of about $8.

"Gold has been anchored near $1,800, so any correction below it, sees it gravitate back towards $1,800 like a rubber band and any move towards $1,820, sees it snap right back," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

But Streible expects yields to drift lower, the dollar to drop and some weaker U.S. economic readings to support gold prices going forward.

The precious metal however failed to take advantage of a weaker dollar on Monday. U.S. benchmark treasury yields were also down slightly, having pared most of an early drop to a near one-week low.

Market participants are focused on a U.S. Federal Reserve meeting that begins on Tuesday, following comments from it's chair Jerome Powell that suggested that the central bank would remain accommodative.

"Should market participants discover that the FOMC has been hashing out more details about its tapering plans, that could force gold to relinquish the psychologically-important $1800 level and test the June lows around $1750-$1770 for support," Han Tan, market analyst at Exinity Group said.

"Any near-term relief for bullion is likely to be resisted around $1,830 where its 50-day simple moving average lies, barring a dovish surprise from the Fed this week."

In other metals, silver gained 0.2% to $25.20 an once, palladium rose 0.7% to $2,692.24 and platinum was up 0.8% to $1,070.44.

(Reporting by Nakul Iyer and Arundhati Sarkar in Bengaluru; Editing by Kirsten Donovan)