Gold prices edged higher on Tuesday as the dollar pulled back from multi-week highs ahead of the US Federal Reserve's two-day monetary policy meeting.

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Spot gold was up 0.2 percent at $1,341.38 as of 0344 GMT. US gold futures also rose 0.2 percent to $1,345.20 an ounce.

"The overall sentiment in the gold markets is positive. There are expectations that the Fed will cut interest rates, which has weakened the dollar and remains a main driver for prices," said Helen Lau, analyst, Argonaut Securities.

The dollar index against basket of major currencies was down 0.1 percent on Tuesday, making bullion cheaper for investors holding other currencies.

The dollar was slightly undermined by the New York Fed's business index showing a record fall this month to its weakest level in more than 2-1/2 years.

At the current level, there could be some fluctuations in gold prices as there are still some mixed views on the rate cut and some investors are cautious ahead of the Fed's decision, Lau said.

The Fed's two-day policy meeting starting later on Tuesday is the next major focus after markets have priced in more than two 25 basis-point rate cuts by year-end.

That marks a sharp contrast to the Fed's official forecast in March, which showed policymakers deemed the next move would be a hike.

The expectations of an interest cut have been gradually increasing amid the raging US-China trade war, signs of the US economy losing steam and pressure by President Donald Trump to ease policy.

All these factors boosted bullion's appeal, with the yellow metal gaining nearly 6 percent since touching its 2019 low of $1,265.85 in early May.

Meanwhile, the US central bank is expected to leave borrowing costs unchanged this time but possibly lay the groundwork for a rate cut later this year.

"We think that the Fed will not raise rates in June and with regards to policy wording, we could see a slightly less accommodative tone than what the market is expecting," INTL FCStone analyst Edward Meir said in a note.

"In which case the dollar could firm up somewhat further and perhaps pressure gold lower into its trading range."

On the technical front, spot gold may break a support at $1,337 per ounce and fall to the next support at $1,324, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver eased 0.1 percent to $14.84 per ounce, while palladium gained 0.5 percent to $1,457.75.

Platinum edged 0.1 percent lower to $791.59 an ounce after falling to its lowest since May 31 at $786 earlier in the session.

First Published:Jun 18, 2019 10:30 AM IST