PRECIOUS-Gold inches up as virus fears mount; markets await Fed decision

(Adds comment and updates prices)
* Death toll from coronavirus rises to 132 in China
* U.S. Federal Reserve policy statement due at 1900 GMT
* U.S. 10-yr yield curve briefly inverted on Tuesday

By Asha Sistla
Jan 29 (Reuters) - Gold edged higher on Wednesday after
falling 1% in the previous session, on elevated concerns over an
economic impact of the coronavirus outbreak in China, while
investors awaited a policy decision from the U.S. Federal
Reserve due later in the day.
Spot gold XAU= rose 0.2% to $1,568.90 per ounce by 0807
GMT. U.S. gold futures GCv1 fell 0.2% to $1,567.10.
The virus has caused panic in the market as it is spreading
quickly and there is little known. It has claimed 132 lives so
far and infected nearly 6,000 in China. "It (China virus) is likely to create a problem going
forward as a lot of industries are closing for certain days,"
said Kunal Shah, head of research at Nirmal Bang Commodities in
Mumbai, India.
"In this scenario, the manufacturing activity can get
hampered further and the impact of the same should be visible in
overall GDP growth (of China)."
Several airlines around the world reduced flights to China,
while global companies restricted employee travel to the
country. Bullion is seen as a safe store of value during times of
economic and political turmoil.
Asian shares fell as a spike in new cases of the virus sent
Hong Kong stocks tumbling. MKTS/GLOB
If there is an escalation in the crisis, gold prices can
breach the $1,600 an ounce level, said Jeffrey Halley, senior
market analyst, OANDA.
A brief inversion of the U.S. Treasury yield curve on
Tuesday for the first time since October left investors
unsettled as it often precedes a recession. US/ are now waiting for the U.S. central bank's
monetary policy statement due at 1900 GMT. Analysts widely
expect the Fed to stand pat on interest rates. FEDWATCH
"The main driver for gold this year will be strategic
inflows as it will continue to be viewed as an attractive
diversifier for investor portfolios in an environment where
rates remain low," UBS strategist Joni Teves said.
The Fed is expected to make a slight increase on the
interest it pays on excess reserves held at the central bank in
a move, aimed at lifting the effective federal funds rate,
currently near the bottom of its target range.
Lower interest rates reduce the opportunity cost of holding
non-yielding bullion.
Elsewhere, palladium XPD= advanced 0.5% to $2,301.40 an
ounce, while platinum XPT= rose 0.4% to $989.05.
Silver XAG= rose 0.3% to $17.48, having earlier dipped to
its lowest since Dec. 23 at $17.35.