PRECIOUS-Gold drops over 1% as Fed dashes imminent rate-cut hopes

(Updates prices)
* Dollar crawls up from 3-month lows
* SPDR Gold holdings fell 0.3% on Tuesday
* Spot gold may test support at $1,404/oz - technicals

By Harshith Aranya
June 26 (Reuters) - Gold prices slipped more than 1% on
Wednesday, moving away from a six-year peak hit on the previous
day, as U.S. Federal Reserve officials played down expectations
of aggressive rate cuts, while investors locked in profits
following a strong rally
Spot gold XAU= was down 1.1% at $1,406.91 per ounce as of
0714 GMT, heading for its first decline in seven sessions.
Gold prices hit their highest level since May 14, 2013 at
$1,438.63 in the previous session.
U.S. gold futures GCv1 fell 0.6% to $1,410.60 an ounce.
"The combination of length that was built-up in the market
over the short-term, coupled with Fed coming in and shaking the
trees last night has really flushed out a lot of the weaker
longs in the market," said Stephen Innes, managing partner at
SPI Asset Management.
On Tuesday, U.S. Fed Chairman Jerome Powell asserted the
central bank's independence, stating that it is "insulated from
short-term political pressures", pushing back against U.S.
President Donald Trump's demand for a significant rate cut.
While this hosed down expectations for a
half-percentage-point cut at the Fed's July meeting, investors
are still expecting at least a quarter percentage point
reduction. Separately, St. Louis Fed President James Bullard told
Bloomberg Television he does not think the U.S. economy is dire
enough to warrant a 50-basis-point cut in July. "Gold has had a strong 'melt up' over the last month. So
some short-term profit taking is to be expected," said Heng Koon
How, head of markets strategy at Singapore's United Overseas
Bank.
Hurting bullion appeal, the dollar index .DXY gained 0.1%
on Wednesday crawling away from multi-month lows. USD/
The United States hopes to re-launch trade talks with
Beijing after Trump and Chinese President Xi Jinping meet in
Japan during the G20 summit on Saturday. "Not so big buying coming ahead of the weekend trade talks,
gold could trade below $1,400 convincingly if things pretty much
improve coming out of G20," Innes from SPI Asset Management
said.
Holdings of SPDR Gold Trust GLD , the world's largest
gold-backed exchange-traded fund, fell 0.3% to 799.61 tonnes on
Tuesday from 801.96 tonnes on Monday. GOL/ETF
Meanwhile, gold demand in India could fall to its lowest
level in three years as a rally in local prices to a record high
dents retail purchases. Spot gold may test a support at $1,404 per ounce, a break
below could cause a loss to $1,387, according to Reuters
technicals analyst Wang Tao. Among other precious metals, silver XAG= fell 0.9% to
$15.23 per ounce and palladium XPD= eased 0.1% to $1,526.40.
Platinum XPT= inched down 0.1% to $805.53 per ounce.