PRECIOUS-Gold prices retreat from record high ahead of Fed rate verdict

By Ishaan Arora

Sept 17 (Reuters) - Gold prices retreated on Wednesday from a record-high level touched in the previous session, as investors locked in profits and a firmer dollar weighed on prices ahead of the Federal Reserve's policy decision later in the day.

Spot gold XAU= was down 0.6% at $3,665.98 per ounce, as of 1037 GMT, after hitting a record high of $3,702.95 on Tuesday.

U.S. gold futures GCcv1 for December delivery dropped 0.6% to $3,701.70.

The dollar .DXY edged 0.2% higher after dropping to a more than two-month low on Tuesday. A firmer dollar makes greenback-priced gold more expensive for overseas buyers.

"On several occasions when gold approached $3,700 it came off again, which could well suggest option writers defending that level," StoneX analyst Rhona O'Connell said.

Gold's relative strength index (RSI) stood at 75, down from a more than 17-month high of 81 on Tuesday, indicating that the metal was overbought.

The spotlight is on the U.S. central bank, which is expected to deliver a quarter-percentage-point rate cut later in the day. Remarks from Fed Chair Jerome Powell will also be closely watched for signals on the future path of interest rates.

"(We still) expect a 25-point cut but probably with three dissenting voters," O'Connell added.

U.S. President Donald Trump has called for Powell to enact a "bigger" rate cut.

Lower rates reduce the opportunity cost of holding non-yielding bullion.

Deutsche Bank raised its gold price forecast for next year to an average of $4,000 per ounce, up from $3,700 per ounce, citing favorable foreign exchange and rates environments that could drive further gains.

Elsewhere, in India supplies of used gold jewellery and coins , typically released when investors book profits, have been scarce with many expecting the bullion prices will continue to climb.

Spot silver XAG= slipped 2.6% to $41.44 per ounce, platinum XPT= was down 1.8% at $1,365.22 and palladium XPD= fell 2% to $1,152.45.