Gold prices steady with investor focus on Fed meet

Gold prices traded in a tight range on Tuesday, as investors maintained a cautious stance ahead of this week's policy meeting by the Federal Reserve where the U.S. central bank is likely to hike interest rates to tame high inflation.

FUNDAMENTALS

* Spot gold held its ground at $1,676.80 per ounce, as of 0037 GMT. U.S. gold futures rose 0.5% at $1,686.70.

* The U.S. Fed, at the conclusion of its two-day policy meeting on Wednesday, is expected to raise interest rates by 75 basis points, with markets even seeing a 19% chance for a 100 bps increase.

* High interest-rate environment increases the opportunity cost of holding non-yielding bullion.

* Gold prices weakened on Monday, hovered toward a 29-month low hit on Friday, as the U.S. dollar and Treasury yields firmed on expectations of a hefty Fed rate hike.

* Even though the dollar index dipped 0.3%, it wasn't far from a 20-year high. Stronger greenback makes bullion more expensive for other currency holders.

* The benchmark 10-year Treasury yield held close to its highest level in over a decade scaled on Monday.

* Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.30% to 957.95 tonnes on Monday from 960.85 tonnes on Friday.

* Spot silver lost 0.7% to $19.48 per ounce. Platinum dipped 0.1% to $918.29 and palladium was down 1.5% at $2,191.75.

DATA/EVENTS (GMT)

0115 China Loan Prime Rate 1Y/5Y Sep

1230 US Housing Starts Number Aug

The U.S. Federal Reserve's Federal Open Market Committee starts its two-day meeting on interest rates (to Sept. 21)