Gold prices dipped on Tuesday as the dollar rose to a two-month high, while investors awaited the outcome of a two-day U.S. Federal Reserve policy meeting expected to result in a cut in interest rates.
Spot gold was down 0.3% at $1,422.85 per ounce as of 0550 GMT.
U.S. gold futures rose 0.3% to $1,423.90 an ounce.
"Liquidity is still thin as traders seem to be holding back before the Fed gives its views on monetary policy," said Benjamin Lu, an analyst at Phillip Futures, adding that a firm dollar was putting pressure on gold prices.
"We are also looking at the tone of the Fed speech and how many more cuts are expected. Financial markets are expecting two more cuts in the second half ... Overall, we are quite bullish on gold," Lu added.
The U.S. Fed begins its policy meeting on Tuesday, at which it is widely expected to lower interest rates by 25 basis points (bps). If implemented, it would be the central bank's first rate cut in a decade.
Meanwhile, the dollar hit a two-month high on Tuesday, as expectations of aggressive Fed rate cuts waned. A stronger dollar makes gold costlier for holders of other currencies.
"No one doubts that a (Fed) rate cut will be in store for us this time around," INTL FCStone analyst Edward Meir said in a note.
However, "the giddy expectation prevalent at the beginning of the month calling for a series of cuts that could follow this one move, could be something that we think will be walked back slightly."
The Bank of Japan kept its monetary settings steady on Tuesday but said it would ease "without hesitation" if the economy loses momentum for achieving the central bank's 2% inflation target.
Also on investors' radar was the U.S. and China trade negotiations due to begin in Shanghai on Tuesday, although expectations for progress during the two-day meeting are low.
On the technical side, spot gold remains neutral in a range of $1,412-$1,427 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.83% to 824.89 tonnes on Monday from Friday.
Among other precious metals, silver lost 0.3% to $16.41 per ounce and platinum edged 0.1% lower, to $878.60.
Palladium eased 0.3% to $1,549.04 per ounce, after touching a near two-week high in the previous session.
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