* Fed interest rate decision due at 1800 GMT

* Traders price in 31% chance of a rate hike- CME FedWatch

* Tehran rules out Oman's proposal

(Rewrites for European morning open)

By Sukanya Mitra

July 29 (Reuters) - Gold prices edged up on Wednesday,

supported by some technical buying, as investors hunkered down

for the Federal Reserve's interest rate decision later today.

Spot gold gained 0.22% to $4,036.09 per ounce by 0908

GMT , while U.S gold futures for August delivery were

steady at $4,037.3.

"Gold is holding up today on dip-buying around the

psychological $4,000 level, prospects of a US-Iran diplomatic

off-ramp and market expectations for a Fed hold," said Nikos

Tzabouras, senior market analyst at Jefferies-owned Tradu.com.

The Fed's policy decision is due at 1800 GMT, along with Fed

Chair Kevin Warsh's comments scheduled at 1830 GMT.

Market participants widely expect the central bank to hold

rates steady. Still, about 31% are pricing in a 25-basis-point

hike, according to the CME FedWatch Tool.

"Today's announcement and press conference could spark

significant volatility. Any hawkish signals would open the door

to new 2026 lows, currently sitting at $3,941, while any dovish

tilt would give bullion the opportunity to extend its rebound

beyond $4,100," said Tzabouras.

Traders are expecting a 77% chance of an increase in the

central bank's September meeting.

While gold is typically seen as an inflation hedge, bullion

tends to suffer in a high interest rate environment due to its

non-yielding characteristic.

Meanwhile, the Bank of England and the Bank of Japan are

widely expected to keep rates unchanged this week, and to

caution against rising inflation.

Commerzbank on Tuesday lowered its year-end gold price

forecast to $4,500 per troy ounce and said it expects sliver to

reach $67 per troy ounce by the end of the year.

On the geopolitical front, Tehran ruled out Oman's proposal

for regional joint management of the Strait of Hormuz, a senior

Iranian official told Reuters on Wednesday, dimming hopes for a

resolution.

Oil prices were up nearly $3 a barrel on Wednesday after

joint strikes in Iraq by the United States and Saudi Arabia.

Elsehwere, spot silver climbed 1.3% to $57.86 per

ounce, platinum dropped 0.9% to $1,591.33, and palladium

dipped 0.7% to $1,260.25.