PRECIOUS-Gold dips ahead of Fed's rate decision; silver extends rally above $60

(Updates prices)

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Silver hits record high of $61.61/oz

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Silver crossed $60/oz for the first time on Tuesday

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Fed expected to cut rates, decision due at 1900 GMT

By Pablo Sinha

Dec 10 (Reuters) - Gold prices edged down on Wednesday as investors awaited an expected interest rate cut by the U.S. Federal Reserve and clues on its future policy, while silver extended its rally to new highs.

Spot gold was down 0.3% to $4,197.91 per ounce at 1243 GMT. U.S. gold futures for February delivery inched 0.2% lower to $4,226.40 per ounce.

Meanwhile, spot silver rose 0.6% to $61/oz after hitting an all-time high of $61.61 earlier in the session, driven by rising industrial demand, declining inventories, and its designation as a critical mineral by the United States. The white metal has risen 112% so far this year.

"Silver broke above the $60 per ounce mark, luring more short-term speculators and trend followers into the market. This also reflects the narrative of physical tightness in the silver market," said Julius Baer analyst Carsten Menke.

The Federal Open Market Committee (FOMC) is expected to announce its rate decision at 1900 GMT, and Fed Chair Jerome Powell is due to speak at 1930 GMT. Markets are assigning an 88% probability to a 25-basis-point reduction.

"Gold is sort of range trading until we receive news from the FOMC ... what will move gold is not necessarily the cut in itself, but more about the guidance for the future," said Nitesh Shah, commodities strategist at WisdomTree, adding that higher Treasury yields were pressuring gold at the moment.

Benchmark 10-year U.S. Treasury yields have risen to their highest in more than three months.

"During the past few weeks, the demand for gold from investors measured by holdings of physically-backed products was not as strong as for silver. We see this as the main factor holding back gold," Menke said.

"Gold's performance remains one of the primary drivers of silver prices - any correction in gold could lead to amplified volatility in silver," said ActivTrades analyst Carolane de Palmas. Meanwhile, White House economic adviser Kevin Hassett, the frontrunner to replace Powell as Fed Chair, said on Tuesday that there was "plenty of room" to cut interest rates further, though rising inflation could change that calculation.

Lower rates tend to favour non-yielding assets such as gold.

RBC Capital Markets raised its long-term gold price forecasts to an average of $4,600 per ounce in 2026 and $5,100 per ounce in 2027, citing geopolitical risks, softer monetary policy, and persistent budget deficits.

Platinum lost 1.7% to $1,661.70, while palladium fell 1.3% to $1,487.11. (Reporting by Pablo Sinha in Bengaluru. Editing by Alexandra Hudson, Mark Potter and Varun H K)