Investing.com - Gold prices drifted higher in range-bound trade during Europe's session on Tuesday, as investors waited for the outcome of the Federal Reserve and Bank of Japan policy meetings on Wednesday for further trading cues.
Gold for December delivery on the Comex division of the New York Mercantile Exchange inched up $2.00, or 0.15%, to trade at $1,319.80 a troy ounce by 3:55AM ET (07:55GMT).
On Monday, prices tacked on $7.60, or 0.58%, as the U.S. dollar slipped amid expectations of no rate change from the Fed.
The U.S. central bank is not expected to take action on interest rates at the conclusion of its two-day policy meeting at 2:00PM ET (18:00GMT) on Wednesday.
Fed Chair Janet Yellen is to hold what will be a closely-watched press conference 30 minutes after the release of the Fed's statement, as investors look for any hints on a December rate increase.
The central bank will also release its latest forecasts for economic growth and interest rates.
Markets are currently pricing in just a 12% chance of a rate hike this week, according to Investing.com's Fed Rate Monitor Tool. For December, odds stood at around 59%.
The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
The U.S. dollar index, which measures the greenback's value against a basket of six major currencies, fell 0.2% to 95.60 early Tuesday. On Friday, it touched 96.11, its strongest level since September 1.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
The market is also waiting for the outcome of a Bank of Japan policy meeting on Wednesday, with speculation rife that the Japanese central bank will make crucial changes to its easing program.
Speculation points to a possible interest rate cut deeper into negative territory, tweaks to its asset-purchase program or new rules on the duration of securities it will purchase in the bond market.
The BOJ has already implemented negative interest rates and is printing 80 trillion yen ($750 billion) a year to stimulate inflation after decades of deflation and stagnant growth, yet inflationary expectations appear to be weakening.