Gold hits a lull as investors focus on Fed meeting

Gold prices were subdued on Tuesday ahead of a crucial U.S. Federal Reserve meeting that could offer cues on future interest rate hikes amid rising inflationary pressures.

Spot gold edged down 0.04% to $1,792.25 per ounce by 1037 GMT. U.S. gold futures for December delivery dipped 0.04% to $1,795.00 per ounce.

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"The theme of today`s market is the Fed and nothing else," said Carsten Fritsch, a commodities analyst at Commerzbank.

"I expect the Fed will announce the start of tapering but I do not see them giving a specific timing around a rate hike and that may lead to some disappointment because market participants are expecting something more specific that could push gold towards $1,800 per ounce or even beyond that."

While gold is used as a hedge against inflation, reduced stimulus and interest rate hikes tend to push government bond yields up, raising non-yielding bullion`s opportunity cost.

The Fed is expected to approve plans to scale back its bond-buying programme on Wednesday, when it concludes a two-day policy meeting.

Markets will also be watching the Bank of England policy meeting on Thursday as investors weigh chances of the first interest rate hike by a major central bank since the pandemic.

"The week ahead could be volatile for gold prices... the yellow metal is likely to be influenced by the dollar`s movements, Treasury yields, inflation expectations and global risk sentiment," Lukman Otunuga, a senior research analyst at FXTM, said in a note.

The U.S. dollar was steady on the day, making gold less appealing to holders of other currencies.

Elsewhere, spot silver slipped 0.5% to $23.89 per ounce. Platinum fell 1.2% to $1,051.75 per ounce and palladium declined 0.5% at $2,037.18 per ounce.