Gold ticks higher as markets brace for Fed decision

July 29 (Reuters) - Gold prices edged up on Wednesday, supported by some technical buying, as investors hunkered down ahead of the Federal Reserve's interest rate decision later in the day.

Spot gold XAU= rose 0.1% to $4,032.59 per ounce by 1121 GMT, while U.S. gold futures GCcv1 for August delivery fell 0.2% to $4,031.90.

"Gold is holding up today on dip-buying around the psychological $4,000 level, prospects of a US-Iran diplomatic off-ramp and market expectations for a Fed hold," said Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

The Fed's policy decision is due at 1800 GMT, with Fed Chair Kevin Warsh's comments scheduled for 1830 GMT.

About 36% of market participants are pricing in a 25-basis-point hike, according to the CME FedWatch Tool.

"Today's announcement and press conference could spark significant volatility. Any hawkish signals would open the door to new 2026 lows, currently sitting at $3,941, while any dovish tilt would give bullion the opportunity to extend its rebound beyond $4,100," said Tzabouras.

Traders are expecting an 80% chance of an increase at the central bank's September meeting.

While gold is typically seen as an inflation hedge, bullion tends to suffer in a high-interest-rate environment due to its non-yielding nature.