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.

Fundamentals
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.

“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 program 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.

Spot silver fell 0.2% to $23.98 per ounce. Platinum dropped 0.7% to $1,056.58, while palladium was flat at $2,047.26.