Gold fell 1pc on Wednesday as the dollar firmed with investors awaiting the U.S. Federal Reserve's decision on interest rates, while supply concerns fuelled by tensions over Ukraine drove an 8pc rally in palladium.
Spot gold dropped 1pc to $1,829.65 per ounce at 12:19 p.m. ET (1719 GMT). U.S. gold futures fell 1.1pc to $1,831.40.
Silver fell 0.2pc to $23.77.
The dollar held near a 2-1/2-week high in the run up to the policy decision at 2 p.m. EST (1900 GMT). Money markets are pricing in a first rate rise in March, followed by three more quarter-point increases by year-end.
Gold is being driven by "a combination of profit-taking after making new recent highs and ahead of the Fed meeting, a little firmness in the dollar and the prospect of rate hikes," said David Meger, director of metals trading at High Ridge Futures.
Analysts said interest rate hikes raise the opportunity cost of holding non-yielding gold, but bullion has remained supported on safe-haven demand amid a standoff between Western powers and Russia over concerns that Moscow may invade Ukraine.
"Even more aggressive rate hikes may end up being positive for gold as it will further raise the risk of a policy mistake from the Federal Reserve as it increases recessionary risks," Saxo Bank analyst Ole Hansen wrote in a note.
Palladium, meanwhile, jumped 7.3pc to $2,359.79 an ounce, having hit its highest since Sept. 8 at $2,382.82, while platinum climbed 2.1pc to $1,047.00.
High Ridge's Meger attributed the palladium rally to the Ukraine situation, since Russia was a key producer.
Platinum and palladium are used in emissions-reducing autocatalysts for vehicles.
Heraeus precious metals wrote in a note on Tuesday that palladium would "remain volatile this year as the market is finely balanced and any events which change supply or demand could shift the market further into surplus or into deficit."