Gold locked below $1,300 as market braces for Federal Reserve meeting

Goldprices remainedlockedjustbelow$1,300 an ounce on Tuesday as investors waited for clues on the pace of USinterest rate rises from aFederal Reservemeeting this week.

AFedstatement and press conference expected from 1800 GMT on Wednesday could pushgold out of the tight range of around $1,290-$1,305 in which it has been trapped since mid-May.

Goldis highly sensitive to interest rates because higher rates push up bond yields, making non-yieldinggoldless attractive, and tend to strengthen the dollar, increasing the cost ofgoldfor buyers using other currencies.

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Investors expect theFedto increase rates on Wednesday but will be looking for hints at future policy. A more aggressive stance on monetary tightening would hurtgold.

"We are waiting for the FOMC," said Saxo Bank analyst Ole Hansen, referring to theFed's policy committee.

Goldprices have tended to fall ahead of previous rate rises but recover afterwards, he said. "We're still erring towards the potential for a move higher here."

Spotgoldwas down 0.1 per cent at $1,298.15 an ounce at 1021 GMT, while US goldfutures for August delivery were 0.1 per cent lower at $1,302 an ounce.

The dollar and USbond yields were also largely flat.

Adding to the wait-and-see mood forgoldwere expectations that the European Central Bank will signal a winding down of its vast bond-buying programme at ameetingon Thursday. This would likely helpgoldby boosting the euro and weakening the dollar.

Japan's central bank will also meet on June 14-15.

Golddid not react strongly to a pledge by the leaders of the United States and North Korea to work toward complete denuclearisation of the Korean peninsula.

The joint statement signed at the end of a summit in Singapore gave few details on how this goal would be achieved.

Goldis traditionally used as a safe place to invest money during times of uncertainty, and growing tensions over Korea have added to demand.

In other precious metals, silver was down 0.2 per cent at $16.86 an ounce after hitting a seven-week high of $16.95 on Monday.

Platinum was 0.2 per cent higher at $905.80 an ounce and palladium was down 0.3 per cent at $1,019 an ounce.