* Fed seen raising interest rates, 2018 projections in focus Gold down 4 pct from over 1-1/2 year high touched in January
* GRAPHIC-2018 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates throughout, adds LONDON dateline) LONDON, March 21 (Reuters) - Gold recovered from a three-week low as the dollar eased on profit-taking ahead of the U.S. Federal Reserve's meeting later on Wednesday, which could provide further clues on the pace of expected interest rate increases. With a rate rise of 25 basis points seen as a done deal, investors will be on the lookout for whether the Fed forecasts four increases in 2018, one more than previously forecast.
Spot gold was up 0.4 percent at $1,315.71 an ounce at
1111 GMT, having dropped as low as $1,306.91 in the previous session.
U.S. gold futures for April delivery rose 0.3
percent to $1,315.40. "A 25 base hike is priced in, so the potential impact could come from the statement and what happens to the Fed projection for inflation and rate expectations in 2018," said Capital Economics commodities economist Simona Gambarini.
The dollar index , which measures the greenback
against a basket of six major currencies, slipped 0.3 percent to 90.135 after climbing to its highest since March 1 in the previous session. A weaker greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies. "The U.S. dollar has been the primary driver of the gold price over the last week, and market reaction to tonight's FOMC announcement is likely to dictate any near-term move," MKS said in a note. "Gold should find support at the $1,307-$1,308 level that has held over the last couple of sessions, and at the psychological $1,300 level below that." The Fed will make an announcement on interest rates at 1800 GMT on Wednesday and new Fed Chairman Jerome Powell will hold his first news conference at 1830 GMT. The expectations for a faster pace of U.S. rate hikes have caused gold to fall 4 percent from a 1-1/2 year high reached in January. Higher U.S. interest rates typically reduce demand for non-yielding bullion, though analysts said that the possibility of an escalation in geopolitical tensions could cushion gold. U.S. President Donald Trump is expected to unveil up to $60 billion in import duties on Chinese goods by Friday, following on from tariffs he imposed this month on imported steel and aluminum. Investors are worried that Trump's actions could escalate into a trade war if China and other countries retaliate, threatening global growth.
Among other precious metals, silver added 0.5 percent to $16.29 an ounce while platinum was up 0.5 percent at $944.90 and palladium rose 0.2 percent to $980.50.
(Additional reporting by Eileen Soreng and Nallur Sethuraman in Bengaluru Editing by David Goodman)