LONDON, April 30: Gold fell to a three-month low on Wednesday as investors squared positions and took profits ahead of a decision on U.S. interest rates by the Federal Reserve later in the day.

Gold fell to $866.20/$867.20 an ounce from $873.55/874.75 an ounce late in New York on Tuesday, when it tumbled to $868.20 an ounce, its lowest since late January, on a combination of a rise in the dollar and a fall in oil.

The metal has come under pressure over the last week as the dollar recovered against the euro and oil prices retreated from record highs.

Gold could trade sideways but I think the profit-taking will continue and that the lack of confidence in gold is going to increase, he said.

But analysts revealed divisions towards the outlook for gold prices, with some expecting the metal to witness bursts of physical demand following heavy price declines in recent weeks.

Gold has lost more than 15 per cent in value since spiking to a record high at $1,030.80 on March 17, but the drop has attracted physical buying from jewellers.

In the physical sector, jewellery makers from India to Indonesia have snapped up purchases of bullion after it dived to lower levels, pushing up premiums for gold bars in Southeast Asia.

Dealers saw buying from India, the world’s largest gold consumer, ahead of a religious festival in May, as well as demand from jewellers in Thailand, Vietnam and Indonesia, which is Southeast Asia’s main buyer.

Expectations of further declines in the dollar over the coming three months should help support gold prices, said Suki Cooper, precious metals analyst at Barclays Capital.

The dollar steadied on Wednesday, with investors showing a reluctance to take significant bets ahead of the Fed move.

It was barely changed at 104.06 yen, while the euro was flat at $1.5560, holding near a one-month low of $1.5540 hit the previous day.

Spot platinum fell to $1,907.00/1,922.00 an ounce from $1,918/1,938 late on Tuesday.Silver edged down to $16.49/16.54 an ounce from $16.51/15.59 an ounce. Spot palladium dropped to $414.00/420.00 an ounce from $421/429 an ounce.—Reuters