Gold price slumps ahead of Fed meeting

LONDON, Mar 19 (Reuters): Gold touched its lowest in more than two weeks on Monday as markets remained nervous ahead of a U.S. central bank meeting that could raise interest rates and signal three more increases this year.

The price of gold has bounced after each of the five previous U.S. rate hikes and is expected to again, said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"We have plenty of geopolitical risks and uncertainty, which continue to provide support, and once the rate hike's out of the way the market will return its attention to whether Washington is moving further towards protectionism and trade wars, which could lead to lower growth," he said.

Spot gold, which fell for a fourth straight session, was down 0.1 per cent at $1,312 an ounce at 1050 GMT. It earlier dropped to $1,307.51, its lowest since March 1.

U.S. gold futures for April delivery eased by 0.1 percent to $1,311.60. "We have a band of support at $1,300-$1,307 -- there's the 100-day moving average coming in, there's the previous low and $1,300 is the big psychological level," Hansen said.

Saxo Bank retains a bullish stance but would turn neutral if gold fell below $1,285, he added.

The two-day Federal Open Market Committee (FOMC) meeting begins on Tuesday, with the U.S. central bank expected to raise interest rates for the first time this year on Wednesday.

With an increase of 25 basis points seen as a done deal, one key focus is whether Fed policymakers forecast four rate hikes this year instead of the three projected at the December meeting.

"I think the overall economic recovery is good enough for the (U.S.) central bank to consider a faster pace of normalisation of monetary policies," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Gold is highly sensitive to rising U.S. interest rates, which reduce its appeal compared with interest-bearing investments.

Gold speculators cut their net long position by 16,153 contracts to 145,659 contracts, U.S. Commodity Futures Trading Commission (CFTC) data shows. This was the smallest net long position since early January.

Among other precious metals, silver was unchanged at $16.30 an ounce and palladium added 0.3 per cent to $997.30. Platinum edged up by 0.1 per cent to $943.50 after touching its lowest since Jan. 03 at $936.50.