* Asian stocks, dollar fall
* HSBC expects gold to hit $1,300 on dovish Fed, soft dollar
* Fed's two-day policy meet begins later in the session (Updates prices)
By A. Ananthalakshmi
SINGAPORE, April 26 (Reuters) - Gold reversed early gains on Tuesday, dropping despite a decline in dollar and equities, as investors remained cautious ahead of policy meetings this week at the Bank of Japan and the U.S. Federal Reserve.
The U.S. dollar fell versus the yen as traders took profits from the greenback's recent rally against the Japanese currency. Expectations of a dovish Fed also hurt the dollar. Asian stocks retreated as investors were wary of riskier assets ahead of the central bank meetings. MKTS/GLOB
Spot gold XAU= eased 0.3 percent to $1,234.16 per ounce by 0653 GMT, after gaining 0.3 percent earlier in the session.
"The metal continues to be influenced to a large extent by dollar movements," said HSBC analyst James Steel, adding that he expects gold to reach $1,300 this year.
"As well as a weaker dollar, we see global risks and a modest recovery in oil prices as gold-bullish. The more tame Fed tightening cycle, compared to expectations last year, should also support gold," Steel said.
MKS Group trader Sam Laughlin said support around $1,230 should keep gold buoyant, though gains will be limited by the Fed announcement on Wednesday.
Speculation of further easing sent the yen reeling against the dollar late last week, but uncertainty over whether the BOJ will actually deliver fresh stimulus at its April 27-28 meeting saw the Japanese currency recovering some ground. USD/
The Fed also holds a policy meeting this week, with the two-day gathering kicking off on Tuesday. The U.S. central bank is not expected to raise interest rates at the meeting, but markets will be looking for its take on the global economy and its monetary policy outlook.
Economists expect the Fed to deliver a rate hike in June, and follow up with another by year-end. But interest rate futures show less conviction, underscoring an ongoing wide gap between markets and policymakers on the trajectory of rates.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar.
Assets in SPDR Gold Trust, the largest gold-backed exchange-traded fund, fell 0.3 percent to 802.65 tonnes on Monday, though remained not too far off a two-year high reached earlier this year. GOL/ETF
PRICES AT 0653 GMT
Metal
Last
Change
Pct chg
Spot gold
1234.16
-3.34
-0.27 Spot silver
16.923
-0.066
-0.39 Spot platinum
1005.2
-6.3
-0.62 Spot palladium
596.75
-4.25
-0.71 Comex gold
1236
-4.2
-0.34 Comex silver
16.93
-0.079
-0.46
COMEX gold and silver contracts show the most active months