Spot gold fell 0.1% to $1,977.29 per ounce by 0701 GMT, after hitting its highest since May 24 at $1,984.19 on Tuesday.
U.S. gold futures were little changed at $1,981.00.
The dollar index was 0.2% higher after hitting a more than one-year low on Tuesday, making the greenback-priced gold more expensive for holders of other currencies. [USD/]
While a 25 basis-point rate hike at the Fed’s July 26 meeting is largely expected, the U.S. central bank is “expected to retain its hawkish tone, which could pose a challenge to gold’s upside,” said Yeap Jun Rong, a market strategist at IG.
Economists polled by Reuters expect the likely July rate hike to be the Fed’s last increase in the current tightening cycle.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
“It boils down to what the Fed does at its meeting in July – the commentary will be very important regarding whether there has been any change in the Fed’s views from its last meeting,” Harshal Barot, a senior consultant at Metals Focus, said.
Stock markets were mixed with growth concerns dragging down China while elsewhere futures rose after British inflation came in surprisingly soft. [MKTS/GLOB]
Investors will also keep an eye out for initial jobless claims data on Thursday for the week of July 15, forecasted to rise to 242,000 from a seasonally adjusted 237,000 in the week ended July 8.
Among other metals, spot silver fell 0.3% to $25.02 per ounce, while platinum was down 0.1% to $982.24.
Palladium dipped 0.8% to $1,309.79 after rising to its highest since June 26 at $1,325 on Tuesday.
