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PRECIOUS-Gold gains as dollar pulls back ahead of Fed verdict

       * Fed announcement expected at 1800 GMT
    * Equity market meltdown could help gold - SocGen

 (Adds comments, updates prices)
    By Eileen Soreng
    June 15 (Reuters) - Gold prices rose more than 1% on
Wednesday helped by a tepid U.S. dollar, as investors braced for
a potentially aggressive interest rate hike from the Federal
Reserve.
    Spot gold        rose 1.2% to $1,829.99 per ounce by 1225
GMT while U.S. gold futures        gained 1.1% to $1,832.70.
    The dollar index        was down 0.2% on the day, having
reached a near two-decade high in the previous session, while
benchmark U.S. 10-year Treasury yields also eased from a
multi-year peak.
    Gold is caught between "those focusing on yields and its
potential negative impact on gold and against that we really
have the increased risk by of a stagflation," said Saxo Bank
analyst Ole Hansen.
    Hotter-than-expected U.S. inflation data released last week
has prompted investors to price in an interest rate increase of
75 basis points (bps) rather than 50 bps by the Fed to tame
rising price pressures.
    While gold is often viewed as a safe asset in times of
economic uncertainties, rising interest rates and bond yields
increase the opportunity cost of holding non-yielding bullion
and boost the dollar.
    Equity market meltdown could also lead to some
diversification into gold, French lender Societe Generale said
in a note.
    Investors now await the Federal Open Market Committee's
policy decision on interest rate, due at 1800 GMT.
    If the Fed were to raise interest rates by only 50 basis
points today, some of the movements seen over the last few days
could be reversed, that is yields could fall, the dollar could
weaken and gold could gain, analysts at Commerzbank said in a
note.
    Spot silver        rose 1.9% to $21.48 per ounce while
platinum        was up 2.1% to $939.88. Palladium        was
1.2% higher at $1,836.85 per ounce.


 (Reporting by Eileen Soreng and Arundhati Sarkar in Bengaluru.
Editing by Jane Merriman, Kirsten Donovan)

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