* Bullion down 10 percent so far this year
* Brokerages say gold to drop to or below $1,000
* Two-day Fed policy meeting ends on Wednesday (Updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Dec 14 (Reuters) - Gold fell 1 percent on Monday ahead of a Federal Reserve policy meeting this week, which is expected to announce the first interest rate rise in nearly a decade. urn:newsml:reuters.com:*:nL8N13Z20I
Investors have been cutting gold positions in anticipation of a rate increase and the metal has fallen about 10 percent so far this year. Higher rates could dent demand for the non-interest paying asset, while also boosting the dollar.
Spot gold XAU= eased 0.8 percent to $1,065.10 an ounce at 2:56 p.m. EST (1956 GMT), while U.S. gold futures GCcv1 for February delivery settled 1.1 percent lower at $1,063.40 an ounce.
"Gold's downtrend persists, with initial support around $1,062-$1,063, a break of which could see prices back to their December lows (at $1,045)," ActivTrades chief analyst Carlo Alberto de Casa said.
Bullion prices held technical support just above $1,060, a short-term Fibonacci retracement level from the Dec. 4 high to the Dec. 3 low.
"It's coming into critical support. If it holds right here, we can go higher," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago.
Meanwhile, spot silver XAG= hit its lowest since August 2009 at $13.60 an ounce.
"U.S. rates are going to move somewhat higher, the overall environment is still one of sound growth in the States, there is no inflation on the horizon at all, so from that prospective you don't need any gold," Julius Baer analyst Carsten Menke said.
"We see prices moving sideways between $1,000 and $1,100 next year."
The Fed is expected to issue a post-meeting statement at 2 p.m. EST (1900 GMT) on Wednesday.
"The inevitability of the rate hike is here so it's an accumulation of that," said Tesfaye about the reason for falling gold prices.
"No risk is coming into this market."
Gold remained weak despite the turnaround of both the dollar .DXY falling 0.4 percent against a basket of leading currencies, and U.S. crude turning up after nearing 11-year lows. O/R
Assets in the top gold ETF, SPDR Gold Trust GLD , are at their lowest since September 2008 while physical demand from the world's biggest consumer India was also lacking, with gold prices there swinging to a discount. urn:newsml:reuters.com:*:nL3N1432XC GOL/ETF
BofA Merrill Lynch said on Friday it expected the gold price to slide to $950 early in 2016 due to the upcoming U.S. rate rise, joining a chorus of other brokerages, including Goldman Sachs (N:GS), predicting a drop to, or below, $1,000.
Palladium XPD= rose 0.9 percent to $547.10 an ounce while platinum XPT= was up 1 percent at $853.50 an ounce.