Spot gold fell 1.7% to $2,394.08 an ounce, as of 11:01 a.m. ET (1501 GMT). U.S. gold futures fell 2.2% to $2,304.90.
Gold prices have gained 3.3% so far this month after hitting a record high of $2,431.29 earlier in April.
The dollar rose 0.3% against its rivals, making gold more expensive for other currency holders, while the benchmark 10-year yield also rose.
“Many traders have big profits tied up in gold and silver, and they are willing to stay away from the Fed’s announcement,” said Bob Haberkorn, senior market strategist at RJO Futures. “However, there has been strong Asian demand and strong central bank demand. We have had a flight to safety over the last couple of years. So the gold market is definitely in a bullish position right now and it will continue to move forward for the rest of the year. The US central bank begins its two-day monetary policy meeting on Tuesday, during which it is expected to keep rates between 5.25% and 5.5%. All eyes are on Fed Chairman Jerome Powell’s speech on Wednesday for more clues on rate cut projections. Traders have reduced their bets on a Fed rate cut this year due to recent warmer-than-expected U.S. economic data and persistent inflation.
Powell’s stance could be sharply hawkish, pushing back expectations of a first rate cut to the fourth quarter or even next year – this scenario would bode poorly for gold, said Ricardo Evangelista, senior analyst at ActivTrades .
Meanwhile, spot palladium fell more than 4% to a near two-month low of $934.06 an ounce, reaching parity with its sister metal platinum, down 1, 6% to $932.45.
Spot silver fell 3% to $26.30 an ounce.
