Gold prices rose on Tuesday on the back of a weaker dollar, but were stuck in a tight range as investors refrained from taking big bets ahead a possible aggressive US interest rate hike.
Spot gold was up 0.3 per cent at $1,724.45 per ounce, as of 0311 GMT. US gold futures gained 0.3 per cent to $1,723.60 per ounce.
The dollar slipped for a fourth straight session, down 0.2 per cent against its rivals, making gold less expensive for buyers holding other currencies. "We're not really seeing a tremendous amount of directional conviction here. It seems like the market is most importantly waiting for the Fed announcement," said Ilya Spivak, a currency strategist at DailyFX.
"However, markets over the past two weeks have been consistent with gold picking up and the dollar pulling back, suggesting they are kind of getting comfortable with where the rates outlook they think is going."
The US Federal Reserve is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy. Expectations around a 100-bp rate hike surged after US annual consumer prices saw their sharpest spike in more than four decades in June. However, traders dialled down those bets following recent weak economic readings.
Meanwhile, the European Central Bank may not be done with big rate hikes after its initial half-point increase last week, Latvian central bank governor Martins Kazaks said in an interview with Bloomberg News.
Rising interest rates increase the opportunity cost of holding non-yielding bullion.
Indicative of sentiment, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.06 per cent to 1,005.29 tonnes on Monday. Elsewhere, spot silver rose 0.6 per cent to $18.52 per ounce, platinum gained 0.8 per cent to $886 and palladium was steady at $2,009.