Gold prices held near their lowest in almost five months on Wednesday as investors looked ahead to an expected U.S.
Gold is highly sensitive to rising United States rates as these increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. The Fed has forecast three rate rises for next year, and it is expected to keep its outlook about the same even though the market has been skeptical it will hike as much as it expects.
The U.S. dollar index, a measure of the dollar against a basket of other major currencies, rose 0.24 percent to 94.16 as of 1812 GMT.
In other metals trading, ticked up 5.7 cents, or 0.4%, to $15.72 a troy ounce, after hitting the lowest since mid-July in the prior session.
Strong US producer price data had helped lift the dollar to a four-week high on Tuesday, suggesting improving inflation ahead of the outcome of the Fed meeting on Wednesday.
"We expect a steady grind lower in gold, at least through Wednesday", said INTL FCStone analyst Edward Meir.
"If the Fed comes out of the gate with more hawkish views on the economy and sees inflation improving, it could impact the dollar index".
Meanwhile, investors also took note of a special Senate election in Alabama, which.
Spot gold may bounce to a resistance at $1,250 an ounce before falling again, as it has stabilised around a support at $1,239, Reuters technicals analyst Wang Tao said.
Among base metals, copper for March delivery swung between small gains and losses and closed up 0.4% at $3.0230 a pound.
Globally, fell 0.54 per cent to United States dollars 1,241.40 an ounce in NY in yesterdays trade.