Gold prices rose on Tuesday as the dollar's retreat amid expectations for a less-aggressive interest rate hike strategy from the U.S. central bank made bullion a more attractive bet.
Spot gold was up 0.3% at $1,936.32 per ounce by 0923 GMT. U.S. gold futures gained 0.5% to $1,937.70.
The dollar index dipped 0.2%, making greenback-priced bullion cheaper for many buyers.
Bullion has gained nearly $120 since the beginning of 2023, backed by expectations that the U.S. Federal Reserve might increase rates by only 25 basis points at each of its first two meetings this year, after slowing its pace to 50 bps in December 2022.
"Policy signals from the upcoming FOMC meeting may either validate gold's recent gains or greatly disappoint bullion bulls," said Han Tan, chief market analyst at Exinity.
Some analysts also noted that an expected recession could force the U.S. central bank to loosen its monetary policy tightening.
However, "if the Fed signals its persistence with more rate hikes than markets currently forecast, that may unwind some of the precious metal's year-to-date advances and drag it back closer to the psychological $1,900 mark." FEDWATCH
Although gold is considered a hedge against economic uncertainties, higher rates tend to dull zero-yielding bullion's appeal.
"Any signs of a weaker U.S. economy will be taken as a reason for the Fed to tighten less aggressively, and that could support gold, which would also take in safe-haven flows," said Matt Simpson, senior market analyst at City Index.
Spot silver rose 0.5% to $23.57 per ounce. Holdings in New York's iShares Silver Trust exchange-traded fund increased by 4% on Monday.
