LONDON, April 25 (Reuters) - Gold held above $1,640 an ounce in Europe on Wednesday as the dollar's slide to a three-week low against a currency basket supported prices, but moves were muted ahead of a policy announcement from the U.S. Federal Reserve later in the day.
Appetite for nominally higher-risk assets such as stocks and commodities also improved, helping lift gold, as stronger-than-expected company earnings and solid demand for peripheral euro zone debt helped calm some investors' jitters.
Spot gold was at $1,641.26 an ounce at 0947 GMT against $1,641.73 late on Tuesday, while U.S. gold futures for June delivery were down $1.60 an ounce at $1,642.20.
The Fed is expected to say it will hold interest rates at record lows later, keeping the opportunity cost of holding bullion low. Its accompanying statement will be closely watched for signs that another round of quantitative easing is imminent.
Gold touched a high of $1,790 an ounce in late February as investors bet on a fresh round of monetary easing. It quickly retreated, however, after a spate of firm economic data eroded those hopes and has held within a $70 range this month, its tightest monthly spread since last June.
"The Federal Open Market Committee announcement could be the trigger that takes gold away from its trading range," BNP Paribas analyst Anne-Laure Tremblay said.
"Any mention of the need for further monetary accommodation would of course be positive for the precious metal. On the other hand, a focus on a higher inflation and employment forecast, rather than on current risks to economic growth, could see gold correct lower."
The dollar, which remained the chief driver of gold prices. Gold's correlation with the euro/dollar exchange rate has been at its highest since early January this month.
The U.S. unit fell to its lowest in three weeks versus a basket of currencies, making gold cheaper for holders of other currencies, as a rise in appetite for riskier assets encouraged cautious selling of the low-yielding dollar ahead of the Fed announcement.
The euro rose as investors were relieved when successful auctions sent yields on Dutch, Spanish and Italian debt lower on Tuesday, after the Dutch government collapsed in a crisis over budget cuts.
EURO ZONE WORRIES ABATE
Physical gold demand has been light in recent weeks, offering little support to bullion prices.
"Following the outflows from gold exchange-traded funds the day before yesterday, demand in the United States also appears to be on the ebb from another side," Commerzbank said in a note.
"The U.S. Mint, for example, is on course to record its poorest rate of gold coin sales in April for five years. So far, only 17 thousand ounces have been sold this month, as compared to an average figure of 70 thousand ounces in the first three months of the year."
Spending on gold in major consumer India at this year's Hindu and Jain holy festival of Akshaya Tritiya on Tuesday was subdued compared with the usual heavy buying, as families struggled with rising expenses and high prices.
Meanwhile price volatility could rise ahead of Wednesday's May COMEX options expiry, as call and put options investors look to profit from heavy bets at the $1,650 strike price.
Among other precious metals, platinum was up 0.6 percent at $1,548.49 an ounce, recovering some lost ground after its recent unperformance. The metal widened its historically unusual discount to the gold to nearly $100 on Tuesday.
One ounce of platinum currently buys 0.94 ounces of gold, down from 0.96 ounces a week ago, and 2.3 ounces of palladium, against 2.4 ounces last Wednesday.
Silver was up 0.1 percent at $30.80 an ounce, while spot palladium was up 0.4 percent at $665.83 an ounce.
"Palladium has been somewhat of an outlier in that it has been moving slowly but steadily higher over the past 10 days and was in need of a modest correction," INTL FCStone said in a note. "However, platinum has been weak for some time now, and deteriorating chart patterns have only exacerbated the selling."
"Nevertheless, the precious metals complex as a whole could see a rather decent move higher if the upcoming Federal Reserve policy statement contains enough hints of a possible ease that, in turn, will enable fund money to flow back into the complex." (Reporting by Jan Harvey, editing by Jane Baird)
