Fed Decision Looms Large Over Gold Prices

Gold prices held steady on Tuesday after falling to a one-month low in the previous session. Investors are waiting for cues from the US Federal Reserve's policy decision, which is expected to be announced at 1800 GMT on Wednesday.

The Fed's benchmark rate is expected to be lifted by a quarter of a percentage point to a range of 3.75 percent-4.00 percent. IG market analyst Tony Sycamore noted that 'How Fed Chair Kevin Warsh frames that hike will matter more than the hike itself for gold.'

If the Fed signals a preference for a measured pace, it could be supportive for risk sentiment and gold. However, if the hike is cast as the start of a tightening cycle, it would be a hit to gold and risk assets.

Gold often loses appeal when rates increase because higher interest rates raise the opportunity cost of holding non-yielding bullion. This was evident in data showing US consumer prices accelerated in August, with underlying inflation posting its largest increase in four months.