PRECIOUS-Gold nudges up as investors await Fed verdict

Adds comments, updates prices

By Nakul Iyer

March 16 (Reuters) - Gold steadied on Tuesday as investors awaited policy cues from a two-day U.S. Federal Reserve meeting, while the metal drew some support from a slight dip in U.S. Treasury yields and the dollar.

Spot gold XAU= rose 0.2% to $1,735.44 per ounce by 1021 A.M EDT (1421 GMT). U.S. gold futures GCv1 were up 0.2% at $1,732.90.

"Gold should have found a bottom but the big risk is the Fed, and if the Fed does not push back against the bond market, you could see that one-day of panic selling (in gold)," said Edward Moya, senior market analyst at OANDA.

The U.S. Federal Open Market Committee's two-day meeting ends on Wednesday.

The central bank is expected to reiterate its pledge to keep interest rates pinned near zero until the economy reaches full employment. nL1N2L82OT nL1N2L82MC

Both the dollar and benchmark Treasury yields were slightly softer. USD/US/

In the next few months, rising yields could also be accompanied with stronger gold prices, as a move closer to 2% in yields could derail relentless stock market buying and see gold resume a safe-haven trade, Moya added.

While gold is considered a hedge against inflation, worries over rising prices spurred by stimulus measures and a recovering economy have propelled treasury yields higher, lowering gold's appeal, as the metal does not pay interest.

Elsewhere, palladium XPD= jumped 4.9% to $2,520.31, after scaling a one-year high of $2,520.31 earlier in the session.

"Combination of market tightness coupled with significant demand from the auto sector has conspired in a thin market to see the market fantastically higher," independent analyst Ross Norman said.

Russia's Norilsk Nickel, the world's largest palladium producer, said on Tuesday its 2021 metal production volumes may fall short of its original guidance due to problems with two mines in Siberia. nFWN2LE0C2

Silver XAG= fell 1.3% to $25.93 an ounce and platinum XPT= eased 0.2% to $1,210.24.

(Reporting by Nakul Iyer in Bengaluru; editing by David Evans)

((nakul.iyer@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 80 6749 0417; Reuters Messaging: nakul.iyer.thomsonreuters.com@reuters.net))