PRECIOUS-Gold falls over 1% as Fed tempers expectations of big rate cut

(Updates prices)
* Investors locking in profits after gold's rally - analyst
* Gold still up 8% so far this month
* SPDR Gold holdings fall 0.3% on Tuesday

By Sethuraman N R
June 26 (Reuters) - Gold prices fell more than 1% on
Wednesday, retreating from a six-year peak scaled in the
previous session, on signs the U.S. Federal Reserve will not
resort to a big interest rate cut in July.
Spot gold XAU= was down 0.8% at $1,411.50 per ounce as of
1248 GMT, after falling as much as 1.5% to $1,401.98.
Bullion also snapped a six-session winning streak that
lifted it to $1,438.63 on Tuesday, the highest since May 14,
2013.
U.S. gold futures GCv1 fell 0.3% to $1,414.10.
Fed Chairman Jerome Powell stressed the central bank's
independence from U.S. President Donald Trump, who is pushing
for rate cuts. St. Louis Fed President James Bullard, considered
one of the most dovish U.S. central bankers, surprised some
investors by saying a 50-basis-point cut in rates "would be
overdone". "We have had quite a move higher in gold. There is an
element of profit taking and the catalyst for that (was) the
comments from the Fed yesterday," ING analyst Warren Patterson
said.
"Perhaps, the market got ahead of itself over the outlook
for rate cuts this year, which had driven gold higher. The
realisation that we are not going to see as many cuts as we were
anticipating is weighing on gold at the moment."
Also hurting bullion's appeal, the dollar index .DXY
gained 0.2% on Wednesday, crawling away from multi-month lows.
USD/
Even as the Fed played down big rate cuts, investors are
still expecting at least a quarter percentage point reduction.
Lower interest rates reduce the opportunity cost of holding
non-yielding bullion.
Despite falling almost $30 from the six-year high, gold is
still up 8% so far this month.
"There will be short term volatility, but our positive
conviction on gold has not changed," said Heng Koon How, head of
markets strategy at Singapore's United Overseas Bank, adding the
bank saw gold hitting $1,500 by mid-2020.
"Gold has had a strong 'melt up' over the last month. So
some short term profit taking is to be expected."
The next move in gold could be decided by the outcome of
trade talks between the United States and China during the G20
summit in Japan on Saturday, analysts 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. Among other precious metals, silver XAG= fell 0.2% to
$15.34 per ounce and palladium XPD= rose 0.5% to $1,535.
Platinum XPT= was up 0.3% to $808.13 per ounce.