Gold edged lower on Tuesday, losing its luster ahead of a two-day meeting of the U.S. Federal Reserve that is expected to deliver the second interest rate rise in a decade.
The Fed meeting starts later on Tuesday and markets have priced in a nearly 100 percent chance of a quarter of a percentage point increase. Higher interest rates generally dent demand for non-yielding bullion while strengthening the dollar, in which it is priced.
Spot gold fell 0.5 percent to $1,155.91 an ounce at 2:38 p.m EDT, after briefly touching a 10-month low on Monday.
U.S. gold futures for February delivery settled for $1,159 per ounce.
"The market is looking for future guidance because at this stage a rate hike should be a given," said Saxo Bank's head of commodity strategy, Ole Hansen.
Investors will be looking for clues on how the central bank will deal with inflation that could possibly emanate from the policies of U.S. President-elect Donald Trump and growth expectations.
"The Fed is as confused with Trump as is the rest of the world so it will be interesting what kind of guidance they give going into 2017," Hansen said.
Spot prices recovered from the 10-month low of $1,151.34 an ounce, touched in the previous session, as U.S. Treasury yields came off their highs and the dollar eased ahead of the Fed meeting.
Reflecting lackluster sentiment, holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.14 percent to 856.26 tonnes on Monday from Friday. Holdings are down over 9 pct since November.
Outflows from gold exchange traded products (ETP) continued on Fed's looming December rate hike, said ETF Securities' commodity strategist Martin Arnold.
A greater "risk-on" mindset from investors, accompanied by a stronger dollar as the Fed prepares to hike rates for the first time in 12 months weighed on the gold prices, Arnold said.
In other assets, global stocks rose on Tuesday rose while the benchmark U.S. 10-year treasury yield hovered near a two-year high.
"If we are correct, we should see a rise in rates and a stronger dollar - the two could spark a fresh selloff in gold to the $1,140 level we are targeting for the precious metal for some time in December," INTL FCStone analyst Edward Meir said in a note.
Silver was up 0.4 percent at $17 an ounce, after rising nearly 1.4 percent in the previous session.
Platinum shed 0.7 percent to $924.60. The white metal rose as much as 1.9 percent in the previous session.
Palladium was flat at $722.60.