PRECIOUS-Gold rises as investors await Fed policy decision

* U.S. Fed decision on interest rates due Wednesday
* Palladium off record high hit on Monday

(Updates prices)
By Asha Sistla
Sept 17 (Reuters) - Gold rose on Tuesday, propped up by
expectations for an interest rate cut by the U.S. Federal
Reserve, but traded within a relatively narrow range as
investors awaited further clarity on the central bank's stance
on future monetary policy.
Spot gold XAU= was trading 0.5% higher at $1,505.07 per
ounce at 1:38 p.m. EDT (1738 GMT).
U.S. gold futures GCcv1 settled up 0.1% at $1,513.40 an
ounce.
"What you have is traders positioning in gold right now
trying to prep themselves for the Fed meeting," said Michael
Matousek, head trader at U.S. Global Investors.
The Fed is widely expected to announce a rate cut when it
concludes a two-day policy meeting on Wednesday. It would be the
central bank's second such cut after lowering rates in July for
the first time since the 2008 financial crisis. FEDWATCH
A Fed rate cut this week could put pressure on the Bank of
Japan to ease policy on Thursday.
Lower interest rates decrease the opportunity cost of
holding non-yielding bullion and weigh on the dollar, making
gold cheaper for investors holding other currencies.
"If the Fed underwhelms, or doesn't cut rates, you'd
probably see a good drop in gold. If they do come out and
surprise everybody by cutting 50 bps (basis points) instead of
25, you might see a good pop in gold," Matousek added.
On Monday, gold rose more than 1% before settling 0.6% up
for the day after attacks on oil facilities in Saudi Arabia over
the weekend intensified worries about stability in the Middle
East, prompting U.S. President Donald Trump to apply more
pressure on the Fed to lower rates. "The U.S. and Saudi Arabia are not likely to just sit on
their hands, which will keep anxiety in the world marketplace."
Meanwhile, equity markets were lower, with investors
remaining noncommittal ahead of the Fed's decision and the next
round of U.S.-China trade talks on Thursday. MKTS/GLOB
"Wording (from the Fed) will certainly be looked for as it
was previously interpreted as dovish acknowledgement of the need
for further cuts," said Daniel Ghali, commodity strategist at TD
Securities.
Gold prices have climbed nearly 19%, or more than $200,
since touching a 2019 low of $1,265.85 in early May, supported
by an increasingly dovish stance from major central banks,
escalation in the U.S.-China trade war and Middle East tensions.
"Gold's uptrend is intact and not really in danger of
subsiding anytime soon," TD Securities' Ghali said.
Elsewhere, silver XAG= rose 1.2% to $18.06 an ounce and
platinum XPT= was up 0.6% to $942.08.
Palladium XPD= remained unchanged at $1,605.10 after
touching a record high of $1,626.81 in the previous session.