Gold subdued as market awaits Fed stimulus strategy

Gold prices were subdued and confined to a narrow range on Wednesday as investors awaited for any signs of early tapering from the US Federal Reserve meeting.

Spot gold was down about 0.3% at $1,853.80 per ounce at 1132 GMT. It fell to its lowest since May 17 at $1,843.99 on Monday.

US gold futures was marginally up at $1,857.00.

In a new policy statement and economic projections due on Wednesday, the Fed is expected to acknowledge the first conversations among its policymakers on when and how fast to pare back its massive bond-buying programme, launched to support the economy.

UBS analyst Giovanni Staunovo said the market was looking for any hawkish signals so they would be more likely to move gold prices than the Fed reiterating it would stick with the dovish path of recent months.

"There is inflation pressure building up, so the question is how they perceive that," Staunovo said.

Data on Tuesday showed US retail sales dropped more than expected in May, while producer prices jumped by 6.6% year-on-year during the month, the largest gain since November 2010.

This comes on the back of recent data showing a spike in US consumer prices, which have raised concerns over rising inflation.

However, Fed officials have said rising inflationary pressures are transitory and ultra-easy monetary settings will remain for some time.

"With the US economy currently firing on all cylinders, talk of a tapering of QE in the future could be on the agenda," StoneX analyst Rhona O'Connell said in a note.

Market participants will be focused on any comments over inflation risks, as some corners of the market are convinced the Fed is underestimating the chance that inflation could be persistent, she added.

Elsewhere, silver rose 0.3% to $27.72 per ounce, palladium rose 0.5% to $2,775.31, and platinum fell 0.8% to $1,144.74.