By William Watts
Gold futures edged higher early Tuesday, building on the yellow metal's highest close in more than two weeks as traders awaited this week's Federal Reserve decision for clues on interest rates.
Market drivers
Gold has largely traded sideways since spring, and is off around 0.5% so far in September. It's seen pressure as Treasury yields advanced and the U.S. dollar strengthened. Higher yields raise the opportunity cost of holding nonyielding assets like gold, while a stronger dollar makes commodities more expensive to users of other currencies.
The Federal Reserve is fully expected to leave interest rates unchanged Wednesday when it concludes a two-day policy meeting, but investors will be looking for clues as to whether a further rate increase may be in store.
See: 4 things to watch for at this week's Fed monetary-policy meeting
"The question now for gold traders is whether the Fed is willing to acknowledge that it's probably done with rate hikes, as we heard from the ECB last week, or continue to insist another is likely," said Craig Erlam, senior market analyst at Oanda, in a note.
"The dot plot will be key to this but as always, traders will hang on Powell's every word. A hawkish tone from the Fed could put $1,900 in jeopardy," he wrote. The dot plot is the graph of interest-rate projections from individual Fed policy makers.
-William Watts
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