Oil prices edged higher after attacks on Saudi Arabian energy infrastructure left the kingdom's East-West Pipeline offline, raising fears that damage to energy infrastructure and transport routes could take longer to repair.
Among other metals, spot silver XAG= rose 0.1% to $63.31, platinum XPT= gained 0.5% to $1,768.60, while palladium XPD= was unchanged at $1,292.70.
Fed decision and oil prices in focus
Traders now await the Fed's rate decision, which is due to be announced at 2 p.m. EDT (1800 GMT) on Wednesday. Financial markets are betting heavily that U.S. central bank policymakers will lift the benchmark overnight interest rate by a quarter of a percentage point to the 3.75%-4.00% range, and signal further tightening ahead.
"I think a lot of (rate-hike fears are) already baked in ... It really depends on what the Fed says afterward. Are they going to continue to raise rates? Are they going to monitor the situation? Overall, it's not a good look for gold," Pavilonis said.
The dollar rose, making greenback-priced bullion more expensive for holders of other currencies, while benchmark 10-year U.S. Treasury yields rose to their highest level since 2007.
While gold is traditionally viewed as a hedge against inflation and geopolitical uncertainty, higher yields on risk-free Treasuries reduce the appeal of the non-yielding metal.
"Much of the hawkish Fed risk appears to be priced in. However, gold could remain vulnerable if policymakers signal rates will stay higher for longer," analysts at ING said in a note.
Gold slips as yields and dollar rise
Gold prices fell on Tuesday, pressured by a stronger U.S. dollar and elevated U.S. Treasury yields, as a rally in crude oil prices fuelled inflation worries and bolstered expectations that the Federal Reserve would raise interest rates this week.
Spot gold XAU= was down 0.2% at $4,289.74 per ounce, as of 11:52 a.m. EDT (1552 GMT), after hitting its lowest point since August 7 on Monday. U.S. gold futures GCcv1 fell 0.5% to $4,330.30.
"Higher energy prices cause more inflation. More inflation could cause higher interest rates. That's not good for gold ... gold is in kind of a range-bound area. It could actually sell off more if rates continue to move higher," said Daniel Pavilonis, senior market strategist at StoneX.
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