PRECIOUS-Gold climbs as dollar falls ahead of Fed minutes
* Dollar, stocks fall ahead of Wednesday's Fed minutes
* Holdings of largest physical gold fund steady
* Chinese buying soft, traders say
(Updates prices, adds comment)
LONDON, Aug 20 (Reuters) - Gold prices climbed on Tuesday as the dollar fell against a basket of currencies, pressured by uncertainty ahead of the release of minutes of the U.S. Federal Reserve's July meeting on Wednesday.
News from the Fed is being closely watched for clues on the outlook for U.S. monetary policy, a key driver of gold prices, as speculation mounts that the bank may taper its $85 billion monthly bond-buying programme from as early as September.
Spot gold was up 0.7 percent at $1,375.40 an ounce at 1418 GMT, having previously hit a session low at $1,352.20, while U.S. gold futures for December delivery were up $9.60 at $1,375.30 an ounce.
"In the end everybody is looking to the next FOMC minutes on Wednesday," said Tobias Merath, head of commodity research at Credit Suisse. "The Fed might sound rather dovish in the minutes, and that would be bullish for gold."
The dollar index fell 0.5 percent, tracking a drop in U.S. Treasury yields and as investors chose safe haven currencies over the dollar in the uncertainty ahead of the release of the Fed minutes.
Rising expectations that the Fed will start to scale back monetary stimulus measures next month pushed European shares to a two-week low, while the Euro STOXX 50 Volatility Index surged 10.5 percent, highlighting uncertainty over the near-term outlook for financial markets.
Prices for U.S. Treasuries rose on Tuesday after a recent slump left yields at two-year highs, with investors dumping riskier assets around the world to scoop up relatively cheap U.S. government debt.
Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, held steady on Monday after posting their first weekly rise this year last week.
From a chart perspective, analysts say a close above its 100-day moving average - not seen since December - at $1,371 an ounce could lead to further gains for spot gold prices.
"A close above this level, combined with ETF holdings that are steadying and a physical market that is holding up relatively well despite the price rally, could possibly see the metal testing $1,400 and even reaching higher soon," Standard Bank said in a note.
Gold buying from China, the world's second largest bullion consumer, was quiet on Tuesday, traders said. Shanghai gold futures fell 1 percent after a three-session rise.
Indian gold futures eased from an eight-month high on Tuesday as a recovery in the rupee and an early dip in overseas markets prompted buyers to cash in gains.
Technical indicators showed highly overbought conditions, which led to profit-taking, said Gnanasekar Thiagarajan, director with Commtrendz Research.
Indian traders said they will start importing gold again over the next week, after the county's central bank clarified a rule that stopped the flow of the precious metal into the top gold consumer at the end of July.
Silver was last trading at $23.24 an ounce, up 0.5 percent. Platinum last traded at $1,519 an ounce, up 1.1 percent, while palladium was up 0.5 percent at $751.47 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jan Harvey, William Hardy and David Evans)