* Fed expected to raise U.S. interest rates* Investors look for guidance on future rate hikes* Stronger U.S. dollar pressures gold* ETF gold holdings at highest since November 2016 (Updates prices; adds comment, additional byline, NEW YORK todateline)By Renita D. Young and Peter HobsonNEW YORK/LONDON, March 20 (Reuters) - Gold prices fell onTuesday as the U.S. dollar strengthened ahead of a FederalReserve meeting at which the U.S. central bank is expected toraise interest rates for the first time this year.
The looming Fed meeting has helped to push gold down 4percent from a 1-1/2-year high reached in January.
Higher U.S. interest rates are gold-negative because theyraise bond yields, reducing the appeal of non-yielding bullion.They also tend to boost the dollar, making gold more expensivefor users of other currencies.
Spot gold was trading 0.3 percent lower at $1,312.16per ounce at 1:35 p.m. EST (1735 GMT), while the dollarstrengthened against a basket of currenciesandU.S. bond yields rose .
U.S. gold futures for April delivery settled down$5.90, or 0.5 percent, at $1,311.9 per ounce.
"Everyone's wondering how many dots will be on the plot for2018. The market has priced in up to three hikes," said RobHaworth, senior investment strategist for U.S. Bank WealthManagement.The Fed will likely take a cautious approach on raisinginterest rates, helping lift gold prices, said Saxo Bank analystOle Hansen.
"With inflation not really picking up, rising geopoliticalrisk, trade wars looming and a flattening yield curve - this isnot a backdrop that gives the Fed any urgent need to step up thespeed of rate hikes," Hansen said.
Gold prices have tended to fall ahead of Fed rate increasesin recent years and to rise after them.As gold has fallen, funds have scaled back bets on higherprices, with the net long position in Comex gold falling toabout 136,000 contracts from almost 210,000 in late January. That gives investors more space to buy gold, which couldhelp prices to recover, MKS trader Sam Laughlin said.
Holdings of gold in exchange-traded funds (ETFs) tracked byReuters have meanwhile jumped to the highest level sinceNovember 2016. "That tells me longer-term investors have not given up theirbelief in higher prices," Saxo Bank's Hansen said.
Technical support for gold was at its 100-day moving averageof $1,305 an ounce.
Meanwhile, silver lost 0.8 percent at $16.17 an ounceafter reaching a three-month low. Echoing gold's drop, silverdropped nearly 9 percent from a four-month high in January.Platinum dropped 1.2 percent to $941.99 per ounceafter touching its lowest price since Jan. 3 on Monday.
Palladium , fell 0.9 percent to $981.45 after earlierhitting a one-week low of $974.95 per ounce. (Additional reporting by Nithin Prasad and Eileen Soreng inBengaluruEditing by David Goodman and Paul Simao)
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