London: Gold steadied on Wednesday ahead of the conclusion of a two-day US Federal Reserve meeting, which was expected to yield a more hawkish tone from the central bank of the world’s No 1 economy.

The Fed is widely forecast to chop another $10 billion (Dh36.73 billion) from its monthly bond purchases, but is considered unlikely to make other concrete policy moves. Markets are also watching for any clues on when the Fed might begin raising interest rates.

A high reading for US inflation on Tuesday raised expectations that Federal Reserve Chair Janet Yellen might strike a more hawkish tone, signalling a sooner-than-expected rise in interest rates. Tightening rates would lift the dollar and put pressure on dollar-priced commodities such as gold.

“The rise in inflation fuelled expectations of quicker tightening of US monetary policy and higher interest rates in the coming months. This is keeping gains for gold in check,” Commerzbank analyst Daniel Briesemann said.

“Ahead of [the end of] tonight’s FOMC meeting, no one wants to take either side and investors are waiting on the sidelines until the meeting concludes.” Spot gold edged 0.1 per cent lower to $1,270.40 an ounce by 1014 GMT, after closing flat in the previous session.

The dollar held steady against a basket of currencies, underpinned by the strong inflation figures.

A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.

Gold hit a three-week high of $1,284.85 on Monday due to market volatility sparked by violence in Iraq, but prices have dropped since. Gold is up 1.6 per cent so far in June.

“Tensions in Iraq have been the sole reason for gold’s recovery in June, enabled by lofty short positioning,” UBS analysts said in a note.

“But beyond this factor, there’s little reason for gold to keep climbing higher, although there’s enough disinterest to keep it range-bound.” Reflecting bearish investor sentiment towards bullion, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust GLD, fell 0.26 tonnes to 782.62 tonnes on Tuesday — a second straight day of declines.

The fund, considered a proxy for investor sentiment, posted its biggest outflow since mid-April on Monday.

Physical markets in Asia have also remained weak.

In top buyer China, gold prices were trading either at a discount of about $1 an ounce or on a par with the global benchmark, in a sign that buying interest is weak.

Gold premiums in India — the world’s No 2 gold buyer — fell to their lowest in four months as wedding demand cooled off.

Platinum rose 1.2 per cent to $1,449.90 an ounce and palladium rose 1.4 to $824.40 an ounce. South Africa’s platinum producers and union AMCU struck a deal to end a protracted strike, but details — such as timing and additional benefits — remain outstanding, Impala Platinum said on Tuesday.