NEW YORK, June 23 (Reuters) - COMEX gold fell its cheapest in six weeks on Monday in a mirror image of a dollar recovery against the euro before the Federal Open Market Committee meets Tuesday to debate another reduction in U.S. interest rates.
"Continued strength in the dollar has added gradual pressure to gold over the course of the day as traders factor in a rate cut by the FOMC later this week," wrote analyst James Moore of TheBullionDesk.com.
August gold settled down $3.30 at $353.40 an ounce, trading from $358.30 to $351.00, its lowest since May 14.
Spot gold was last shown at $352.80/3.30, down from Friday's close at $356.80/7.30. London's late fix was at $355.00.
Fed policy makers will wrap up their talks Wednesday at about 1415 EDT (1815 GMT). The market considers an easing, which would be the 13th since January 2001, a foregone conclusion after recent Fed comments that potential deflation was more dangerous for the struggling U.S. economy than a little inflation.
The only question seems to be whether the FOMC will opt for a 50 basis point cut off the benchmark federal funds rate or a quarter percentage point.
Economic data last week suggesting that a recovery might be taking hold has the market leaning toward the smaller cut. This has led to short covering in the dollar and long liquidation in gold.
The euro fell to its lowest since May 16 at $1.1508 early Monday and was last at $1.1550/55, down from late Friday.
"Some people were even talking no cut at all. So there's a lot of dollar strength on the back of that one. Strong dollar, weak gold," said a bullion dealer.
The futures market remains extremely overbought after the run in August gold to $375.80 in late May and could use bullish news to prevent further liquidation.
The CFTC said late Friday that the net speculative long position in COMEX gold fell slightly to 64,175 contracts from 65,599 lots in the week ended Tuesday.
"This indicates a gradual flow of light profit-taking but still leaves a substantial risk of more urgent long liquidation," wrote IFR/Pegusus analyst Timothy Evans.
July silver rose 3.0 cents to $4.558 an ounce, trading $4.565-$4.505. Spot silver fetched $4.55/57, up from $4.52/54 late Friday. The fix was at $4.53.
NYMEX July platinum was 10 cents firmer at $668.90 an ounce. Spot platinum was unchanged at $665.00/670.00.
September palladium went up 5 cents to 180.05. Spot palladium was last quoted at $175.50/181.50.