* Gold bullish target $1,561-technicals
* Coming Up: U.S. Existing home sales May; 1400 GMT (Updates prices)
By Lewa Pardomuan
SINGAPORE, June 21 (Reuters) - Gold edged up on Tuesday and held near its highest in two weeks, with no quick end in sight to economic turmoil in Europe after Greece was told to approve a new austerity package to avoid defaulting on its debt.
But slow trade suggested investors were also cautious ahead of a Federal Open Market Committee meeting this week after ratings agency Fitch said it would place the U.S. credit rating on negative watch if its debt ceiling was not raised by Aug. 2.
Spot gold added $2.81 to $1,542.76 an ounce by 0615 GMT after rising as high as $1,545.90 an ounce on Monday, its strongest since June 9. Gold is still below a lifetime high around $1,575 touched in early May.
"We're still not seeing that huge flight-to-safety that is really needed for the sovereign debt crisis to actually propel gold higher," said a dealer in Singapore.
"While investors are cautious, it's not exactly a repeat of what we saw in 2010. For the euro zone debt situation to really drive gold to the record high, it has to get a lot worse."
Financial markets are waiting for a confidence vote on the government in the Greek parliament later in the day, a step towards the passage of more spending cuts in exchange for foreign loans.
A Reuters poll showed euro zone money markets would be severely affected by Greece defaulting on its debt, drying up money supply lines that the European Central Bank has tried to keep flowing.
"We favour buying breaks in gold near $1,520 an ounce while trading other metals as neutral affairs this week," said Tom Pawlicki, precious metals and energy analyst at MF Global.
"Gold will be supported by uncertainty with European sovereign debt, the probability the FOMC leaves accommodative policy in place, from a potential return of investment, and from the possibility that the short-term correction in commodities is nearing its end."
Fitch Ratings said on Tuesday it would regard a voluntary rollover of Greece's sovereign bond maturities as a default and would cut the credit rating appropriately, keeping pressure on Athens ahead of a confidence vote in parliament.
Silver was steady at $36.06 an ounce, below a record at $49.51 an ounce hit in April. Platinum and palladium bounced from Monday's lows.
The dollar index eased as the euro edged up after Klaus Regling, chief of the European Financial Stability Facility, said the bailout fund's guarantees will be raised to 780 billion euro from the 440 billion that has just been rubber stamped by ministers.
The euro could also get support from the Fed's two-day policy meeting that begins on Tuesday, in which the central bank may restate its commitment to hold interest rates near zero for an extended period on signs the U.S. recovery has lost momentum.
The physical market was subdued on Tuesday as prices gyrated but jewellers in Indonesia started making inquiries ahead of the fasting month of Ramadan.
Tokyo stocks posted their biggest daily gain in more than three weeks on Tuesday, but investors said the move was exaggerated by thin volumes as most players remained cautious ahead of a Federal Reserve policy meeting.
Precious metals prices 0615 GMT
Metal Last Change Pct chg YTD pct chg Turnover Spot Gold 1542.76 2.81 +0.18 8.69 Spot Silver 36.06 0.06 +0.17 16.85 Spot Platinum 1743.25 16.30 +0.94 -1.37 Spot Palladium 753.00 9.35 +1.26 -5.82 TOCOM Gold 3986.00 14.00 +0.35 6.89 34684 TOCOM Platinum 4558.00 -14.00 -0.31 -2.94 15927 TOCOM Silver 93.00 1.10 +1.20 14.81 590 TOCOM Palladium 1962.00 36.00 +1.87 -6.44 363 Euro/Dollar 1.4357 Dollar/Yen 80.16 TOCOM prices in yen per gram. Spot prices in $ per ounce. (Editing by Himani Sarkar)