By Peter Hobson
LONDON (Reuters) - Gold edged lower on Wednesday, pressured by a slightly stronger dollar, but activity was muted ahead of a Federal Reserve policy announcement that could trigger a sharp move in prices.
Investors expect the Fed to raise interest rates but want to know if it intends to tighten policy four times in 2018 or three times, as it indicated earlier this year.
A clear hint in the announcement at 1800 GMT could knock gold out of the tight range of about $1,290 to $1,305, in which it has been trapped since mid-May.
More rate rises would hurt gold because they push up bond yields, making non-yielding bullion a less attractive investment, and tend to strengthen the dollar, increasing the cost of gold for buyers using other currencies.
Gold prices have tended to fall before recent U.S. interest rate rises, as investors anticipate the change, but rally afterwards.
Spot gold was down 0.1 percent at $1,294.70 an ounce at 1030 GMT. U.S. gold futures for August delivery also dipped by 0.1 percent, slipping to $1,298.10.
The ECB is expected to signal a wind-down of its huge bond-buying programme, which could strengthen the euro and boost gold demand in Europe.
Holdings of gold by exchange-traded funds (ETFs) tracked by Reuters have decreased by 1.4 million ounces, or 2.4 percent, since late May, while bets on higher prices on the Comex exchange remain low after falling last month to the fewest since January 2016.
Fibonacci technical support was at $1,286, with resistance at $1,301.40, said ScotiaMocatta analysts. Gold is likely to fall unless it moves back above the 200-day moving average around $1,307, they said.
In other precious metals, silver was up 0.1 percent at $16.88 an ounce after hitting a seven-week high of $16.95 on Tuesday.
Platinum was flat at $894.20 and palladium dropped 0.7 percent to $1,011.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)