Gold eases as market prepares for Fed meeting outcome

Gold edged lower on Monday as investors turned cautious in the run-up to a Federal Reserve policy meeting, overshadowing some support from a weaker dollar.

Spot gold was down 0.2pc at $1,798.41 per ounce by 13:56 p.m. EDT, while U.S. gold futures settled 0.1pc lower at $1,799.20.

The U.S. central bank will begin its two-day policy meeting on Tuesday.

"The concern now is that we will get the first hints of not necessarily a rate increase but what kind of reductions the Fed envisions to its balance sheet, and that could be a trigger for rates to move higher," said Edward Meir, analyst with ED&F Man Capital Markets.

Spot gold remains neutral in $1,769-$1,797 range

Meir, however, said that was unlikely to drive a sustained fall in gold, with the metal drawing support from a dovish European Central Bank, a currently accommodative Fed, large fiscal stimulus and higher inflation.

Both the ECB and Fed have suggested they will keep monetary policy accommodative for some time.

Yet Han Tan, market analyst at Exinity Group, said that if the policy-setting Federal Open Market Committee provides more details about tapering plans, gold could test the June lows of $1,750-$1,770.

Bullion's dip came despite a weaker dollar and a slight dip in benchmark U.S. Treasury yields.

Elsewhere, silver rose 0.2pc to $25.22 an ounce.

"You might have to wait for a bit for a breakout in silver, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Gold gains on weaker dollar, stocks ahead of Fed meeting

"Silver relies a lot on infrastructure and the slowdown in China might impact the technology that silver demands in order to be consumed."

Floods in central China, especially in the industrial and transport hub city of Zhengzhou, have raised concerns over damage to the region's infrastructure.

Among other metals, platinum gained 0.8pc to $1,070.11 an ounce and palladium was slightly up at $2,672.98.