Gold locked below $1,300

Gold prices remained locked just below $1,300 an ounce on Tuesday as investors waited for clues on the pace of US interest rate rises from a Federal Reserve meeting this week.

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

Gold is highly sensitive to interest rates because higher rates push up bond yields, making non-yielding gold less attractive, and tend to strengthen the dollar, increasing the cost of gold for buyers using other currencies.

Investors expect the Fed to increase rates on Wednesday but will be looking for hints at future policy. A more aggressive stance on monetary tightening would hurt gold.

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

Gold prices 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.”

Spot gold was down 0.1 percent at $1,298.15 an ounce at 1021 GMT, while US gold futures for August delivery were 0.1 percent lower at $1,302 an ounce.

The dollar and US bond yields were also largely flat.