PRECIOUS-Gold stages rebound on bargain hunting ahead of Fed verdict

By Brijesh Patel

Oct 29 (Reuters) - Gold prices rose on Wednesday as bargain hunters stepped in after bullion dropped to a three-week low in the previous session, with investors now awaiting the Federal Reserve's rate decision later in the day.

Spot gold XAU= was up 0.7% at $3,977.30 per ounce, as of 0634 GMT, after dropping to its lowest since October 7 on Tuesday.

U.S. gold futures GCcv1 for December delivery gained 0.2% to $3,990.60 per ounce.

"The fuel for this short-term correction in gold is a readjustment of safe-haven instrument towards more response instrument like global equities due to trade optimism," OANDA senior market analyst Kelvin Wong said. MKTS/GLOB

"In the near-term, gold faces downside pressure due to position adjustment from short-term leverage players and technical levels that are being breached. However, the fundamentals are still bullish for gold."

Chinese and U.S. officials over the weekend hashed out the framework of a trade deal for President Donald Trump and his Chinese counterpart Xi Jinping, that would pause steeper U.S. tariffs and Chinese rare-earths export controls.

Trump and Xi are set to meet in South Korea on Thursday.

"Progress in U.S.-China trade talks continues to sap demand for haven assets such as gold, which extended a pullback as tension eased ... The recent declines may provide an opportunity for central banks to ramp up purchases," ANZ said in a note.

Meanwhile, the Fed is widely expected to cut interest rates by a quarter-percentage point at the end of its policy meeting on Wednesday, and investors are watching out for any forward-looking commentary from Chair Jerome Powell.

The European Central Bank is expected to leave rates unchanged at its policy meeting on Thursday.

Non-yielding gold thrives in a low-interest-rate environment and during economic uncertainties.

Gold prices have climbed about 52% year-to-date, reaching an all-time peak of $4,381.21 on October 20, bolstered by geopolitical and economic uncertainties, rate-cut bets and sustained central bank buying.

Spot silver XAG= gained 1.5% to $47.73 per ounce, platinum XPT= edged 0.1% higher to $1,587.70 and palladium XPD= rose 0.9% to $1,405.99.

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