Gold nudges up as dollar softens; all eyes on Fed meet

Gold ticked up on Tuesday, as the dollar softened and US real yields plunged to a record low, though gains were kept in check on investor caution ahead of a Federal Reserve policy meeting that could provide details on the tapering of asset purchase.

Spot gold rose 0.2% to $1,800.16 per ounce by 10:05 am EDT. US gold futures were up 0.1% at $1,799.90.

The dollar index slipped 0.1%, lowering gold's cost for holders of other currencies.

Providing a further boost to the metal, the yield on 10-year Treasury inflation-protected securities (TIPS), hit a record low of -1.147%.

The precious metal, however, has been confined to a tight trading range in recent weeks after briefly crossing $1,830, failing to capitalise on subdued U.S benchmark treasury yields.

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"Gold has to be looked at from a cross asset perspective and not just from bonds, and with strong returns in equity markets that impedes capital flows into gold," said Bart Melek, head of commodity strategies at TD Securities.

"To breakout higher, there has to be some negativity and that is right now only being manifested in bond yields," Melek said, while adding that weaker economic readings ahead would likely push gold prices higher again.

Investors are keeping a watch on how the Fed balances rapidly accelerating inflation with the increased economic threat posed by the Delta variant of the coronavirus, in its policy meet that begins later in the day.

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Lukman Otunuga, senior analyst at FXTM, also said in a note that gold could remain range-bound until the Fed meet.

"A hawkish central bank could deliver a heavy blow to zero-yielding gold. However, a meeting filled with doves may boost the precious metal's allure, possibly sending prices higher."

Elsewhere, silver fell 0.5% to $25.04 per ounce, platinum shed 0.9%, to $1,054.87 and palladium dropped 1.2% to $2,626.15, having earlier hit a one-week low of $2,613.51.