PRECIOUS-Gold slips on resurgent risk appetite as virus fears ebb

(Updates prices)
* Markets await ECB policy meeting on Thursday
* Equities gain after Chinese reassurance on coronavirus
* Gold could rise to $1,600/oz in 2020: UBS
* Palladium gains over 2%, platinum up about 1%

By Harshith Aranya
Jan 22 (Reuters) - Gold eased slightly on Wednesday as risk
sentiment recovered and the dollar held firm, but expectations
of dovish monetary policy from global central banks capped
bullion's losses and kept prices above the $1,550 an ounce
level.
Spot gold XAU= was down 0.1% at $1,556.67 an ounce by 1:41
p.m. EST (1841 GMT). U.S. gold futures GCcv1 settled down 0.1%
at $1,556.7.
"Investors are actually selling excess positions, and that
is keeping the prices capped," said Daniel Ghali, commodity
strategist at TD Securities.
"On the other hand, we're also seeing a steady flow of
interest in (gold), and markets are currently building as
capital looks to shelter itself from negative real rates across
the globe."
Investors will keep a close eye on the European Central
Bank's first policy meeting of the year on Thursday, while the
U.S. Federal Reserve's first meeting is scheduled for Jan.
28-29. Both banks are expected to be dovish. The dollar index .DXY has gained about 1.2% since the
start of this year.
In 2020, "precious metals remain a story linked to easy
monetary policy globally and broad U.S. dollar weakness," UBS
analysts said in a note.
"Apart from low U.S. real rates and a weaker dollar, gold
should benefit from any sudden spikes in market volatility due
to late cycle dynamics and ongoing geopolitical noise,
especially when we approach the 2020 U.S. presidential
election," UBS said, forecasting gold to rise to $1,600 this
year.
Lower interest rates reduce the opportunity cost of holding
non-yielding bullion and weigh on the dollar.
"Concerns are growing that we will see a return of risk
aversion once the Fed signals the balance sheet will no longer
keep growing at a pace of $60 billion a month or if we see
phase-two (U.S.-China trade) talks hit a road block," said
Edward Moya, a senior market analyst at OANDA, in a note.
The Chinese response and quick updates about the new
coronavirus has boosted optimism that its spread would be
contained, helping world stock markets recover.
Worries the outbreak could hit economic activity ahead of
the Lunar New Year festivities in China had knocked equities off
record peaks on Tuesday. MKTS/GLOB Elsewhere, palladium XPD= gained 2.2% to $2,455.33 an
ounce, having slid by about 4% in the previous session.
A structural change in demand after tighter emission rules
in some countries will boost palladium demand, said Ghali.
Palladium touched a record high of $2,582.19 on Monday.
Silver XAG= rose 0.2% to $17.81, and platinum XPT= was
up 1.4% at $1,013.37.