PRECIOUS-Gold holds steady as focus shifts to ECB, investors eye rate cuts

* Silver dips, has gained 16% since May lows
* ECB decision at 1145 GMT, Draghi speaks at 1230 GMT

(Updates prices)
By Karthika Suresh Namboothiri
July 25 (Reuters) - Gold held steady on Thursday in cautious
trading before a European Central Bank meeting where the bank is
expected to provide clarity on its stance on monetary policy
easing amid tepid economic data from the region.
Spot gold XAU= was up 0.1% to $1,426.70 per ounce as of
1129 GMT. Prices were short of last week's peak at $1,452.60.
Meanwhile, U.S. gold futures GCcv1 rose 0.2% to $1,426.80
per ounce.
"If we have a bit of a weaker dollar on the back of the ECB
meeting, this might provide some support to gold. I still see
the Fed in the driving seat rather than the other central
banks," said Julius Baer analyst Carsten Menke.
"The underlying driver for gold is that we are experiencing
global growth worries, and expectations of interest rate cuts
have lured people back into the safe haven markets. We can
assume that a lot of good news is priced in with prices trading
well above $1,400."
Money markets are pricing in a 50% chance of a 10 basis
points interest rate cut by the ECB later in the session, a
smaller probability than last week, but some expect President
Mario Draghi will open the door for further cuts down the road
or for more quantitative easing.
Euro zone business growth was much weaker than expected this
month, hurt by a deepening contraction in manufacturing, and
forward-looking indicators in surveys published on Wednesday
suggest conditions will get worse next month, and the ECB is not
expected to look past this.
Sentiment was also cautious in the United States, where
manufacturing activity slowed to a 10-year low in early July
with production volumes and purchases falling.
Futures FEDWATCH remain 100% priced for a rate cut of 25
basis points from the U.S. Federal Reserve's July 30-31 meeting
and even imply an 18% chance of 50 basis points.
Gold is highly sensitive to rising interest rates, which
lift the opportunity cost of holding non-yielding bullion. They
also boost the dollar, in which the metal is priced.
In the day, the U.S. currency against other currencies
.DXY was a touch higher at 97.737. USD/
Amongst other precious metals, silver XAG= slid 0.4% to
$16.53 per ounce. Silver has gained about 16% since a near
six-month low of $14.25 hit in late May.
"The key element that has been fuelling the recent rally in
silver was the stretched levels of the gold-silver ratio which
suggested to many traders that silver was cheap relative to
gold," Menke said, adding the metal was now seeing
profit-taking.
Platinum XPT= inched higher 0.7% to $881.99, while
palladium XPD= edged down 0.2% to $1,537.32.