PRECIOUS-Gold falls on stronger dollar, markets await Fed meeting

* U.S. Fed to start two-day meeting on interest rates
* Palladium hovers near record high of $1,808.81/oz

(Updates prices)
By Sumita Layek
Oct 29 (Reuters) - Gold fell on Tuesday as the dollar firmed
and optimism about a U.S.-China trade deal increased, while
investors looked ahead to this week's Federal Reserve meeting
for signals on future interest rate cuts.
Spot gold XAU= was down 0.4% at $1,485.96 per ounce as of
1220 GMT. U.S. gold futures GCv1 fell 0.5% to $1,488.70 an
ounce.
"A slightly stronger dollar and comments out of the U.S.
indicating that they still plan to have a deal by November
supported the equity market in the U.S. and is keeping the
upside in check for gold," UBS commodity analyst Giovanni
Staunovo said.
"We have probably seen some hedge funds liquidating some
gold positions and putting that money in the equity world."
The dollar .DXY firmed against a basket of rival
currencies, making the dollar-denominated gold more expensive
for holders for other currencies. USD/
In the United States, the S&P 500 index .SPX hit a record
high on Monday on hopes for possible trade deal between Beijing
and Washington after U.S. President Donald Trump said he
expected to sign a significant part of the deal ahead of
schedule. MKTS/GLOB Washington was also considering an extension on tariff
suspensions on $34 billion of Chinese goods. Financial markets are waiting for further clues on the
outlook for U.S. monetary policy from the Fed's meeting starting
on Tuesday, where the U.S. central bank is widely expected to
cut its benchmark interest rates for the third time this year.
FEDWATCH
"The markets have hopes for a rate cut at this meeting, but
even if the Fed would take a pause this week, the markets are
expecting another cut in this quarter ... which is supportive
for gold," Quantitative Commodity Research analyst Peter Fertig
said.
Lower interest rates make gold attractive as it reduces the
opportunity cost of holding the metal.
Also on the radar was Brexit, with Britain heading towards a
December election after Prime Minister Boris Johnson's bet on
breaking the Brexit deadlock with an early vote gained support
from opposition parties. Elsewhere, palladium XPD= was down 1.1% at $1,778.73 per
ounce, having hit a record high of $1,808.81 on Monday, on
supply concerns.
"The market is in its eighth consecutive deficit year and is
likely to stay in the ninth consecutive deficit year next year
as well as supplies are not really growing," UBS's Staunovo
said.
Silver XAG= fell 1.3% to $17.63 per ounce and platinum
XPT= shed 1% to $909.66.