PRECIOUS-Gold edges lower as dollar firms; weaker equities limit losses

* Focus shifts to Fed chief Powell's two-day testimony
* SPDR Gold holdings fall 0.15% on Monday
* Speculators increase net longs in COMEX gold

(Updates prices)
By Brijesh Patel
July 9 (Reuters) - Gold prices ticked lower on Tuesday, as
the dollar scaled to multi-week highs on reduced expectations of
an aggressive U.S. rate cut, although softer share markets
capped the metal's losses.
Spot gold XAU= was down 0.2% at $1,393.03 per ounce as of
0740 GMT.
U.S. gold futures GCv1 fell 0.3% to $1,395.70 an ounce.
"Weakness in gold prices is largely due to easing of rate
cut expectations and bond yields are recovering. Markets
continue to price in a 25 basis point cut but it looks like
sentiment is easing and the dollar has rebounded," said Benjamin
Lu, an analyst at Phillip Futures.
The dollar index .DXY hit a near three-week peak, making
bullion expensive for holders of other currencies. The U.S.
Treasury yield curve hit its flattest level in more than a month
after investors rolled back expectations for a sharp U.S. rate
cut at the end of July. USD/ US/
A week ago, the market forecast an 80.1% chance of a
25-basis-point cut, and a 19.9% chance of a 50-basis-point cut,
according to CME Group's FedWatch tool. The chances are now 98%
and 2%, respectively. FEDWATCH
Adding to the reduced expectations for a larger cut, U.S.
consumers in June lifted their inflation expectations for the
first time in three months, New York Fed data showed on Monday.
However, the decline in gold prices was limited by weaker
financial markets, with Asian stocks falling to their lowest in
two-and-a-half weeks on Tuesday. MKTS/GLOB
"We're seeing a lot of Fed policy uncertainty leak into the
equation across risk assets in general. Equity markets falling
is the most poignant example supporting gold prices," said
Stephen Innes, managing partner at Vanguard Markets.
Market participants now await Fed Chairman Jerome Powell's
two-day testimony before Congress, which starts on Wednesday for
clues about a rate decrease. Meanwhile, holdings of SPDR Gold Trust GLD , the world's
largest gold-backed exchange-traded fund, fell 0.15% to 795.80
tonnes on Monday from 796.97 tonnes on Friday. GOL/ETF
Hedge funds and money managers raised their bullish stance
in COMEX gold in the week to July 2, the U.S. Commodity Futures
Trading Commission (CFTC) said on Monday in a report delayed
because of the U.S. Independence Day holiday. On the technical side, spot gold may end its correction
around a support at $1,387 and then retest a resistance at
$1,421 per ounce, according to Reuters technical analyst Wang
Tao. Among other precious metals, silver XAG= gained 0.1% to
$15.04 per ounce.
Palladium XPD= slipped 0.4% to $1,555.32, and platinum
XPT= fell 0.2% to $812.23.