PRECIOUS-Gold dips as stocks recover, dollar gains ahead of Fed meeting

(Updates prices)
* Dollar rises to highest since Dec. 2
* Overall U.S. durable goods orders rise 2.4% vs 0.4%
consensus
* New orders for key U.S.-made capital goods drop most in
8-months
* Fed's two-day policy meeting starts later in the day

By K. Sathya Narayanan
Jan 28 (Reuters) - Gold fell on Tuesday as equity markets
rebounded following positive U.S. economic data while the dollar
scaled a near two-month peak ahead of the U.S. Federal Reserve's
policy meeting.
Spot gold XAU= was down 0.8% at $1,568.90 per ounce by
2:16 p.m. EST (1916 GMT), having touched its highest since Jan.
8 on Monday. U.S. gold futures GCcv1 settled down 0.5% at
$1,569.8.
The S&P 500 rose over 1%, while U.S. 10-year Treasury yields
rebounded from a near four-month low. The dollar rose to its
highest since Dec. 2. .N US/ USD/
"There seems to be a little bit of a risk-on tone here. The
fears of the coronavirus are still lingering in the market,
(but) regardless of these fears there is going to a contingent
that is willing to bargain hunt," said Ryan McKay, a commodity
strategist at TD Securities.
"The durable goods number was better-than-expected, so that
could be increasing the chances that the Federal Reserve would
not be dovish in the FOMC meeting and that is weighing on
prices."
In December, overall orders for durable goods rebounded 2.4%
against an expected increase of 0.4%. However, new orders for key U.S.-made capital goods dropped
by the most in eight months, while shipments were weak
suggesting that business investment contracted further in the
fourth quarter. The Fed's first policy meeting of the year is scheduled to
start later in the day, where it is widely expected to keep the
benchmark interest rates unchanged. FEDWATCH
Lower interest rates reduce the opportunity cost of holding
non-yielding bullion.
However, concerns that the coronavirus outbreak could hinder
the global economy persist, underpinning overall demand for
gold, Julius Baer analyst Carsten Menke said.
Reactions to the spreading virus had been very different
across markets and the decline in oil prices suggested a
slowdown of economic activity in China. O/R
The death toll from the virus reached 106 in China and some
health experts are questioning whether Beijing can contain it.
Elsewhere, palladium XPD= gained 1.2% to $2,295.53 per
ounce, after falling about 7% on Monday.
"We assume that the correction will continue, as the upswing
beforehand was exaggerated in our opinion," Commerzbank analyst
said in a note.
Silver XAG= dropped 3.5% to $17.45, while platinum XPT=
rose 0.4% to $986.91.