Spot gold was up 0.1% at $1,800.81 per ounce by 12:50 pm EDT. U.S. gold futures were flat at $1,799.70.
Market participants are keen for any details on the Fed's approach to tapering its asset purchases, following rising inflation and a spike in Delta variant COVID-19 cases, from its policy statement at 1800 GMT on Wednesday.
"If the Fed suggests that inflation is heating up, you might see some buying into gold, but if they see it as transitory, then you're probably going to see some selling," said Michael Matousek, head trader at U.S. Global Investors.
The Fed needs to taper its asset purchases before it can raise rates and the pace of its tapering will affect gold, with a more gradual tapering through 2022 benefiting the precious metal, Matousek added.
Edward Moya, senior market analyst at OANDA also said a slower steepening of the U.S. Treasury yield curve should support gold for the rest of the year even as the Fed tapers asset purchases and the dollar strengthens.
Higher interest rates tend to weigh on bullion, as it raises the opportunity cost of holding the non-yielding metal.
The dollar, meanwhile, was up 0.1%, making gold more expensive for holders of other currencies. [USD/]
Elsewhere, silver rose 0.7% to $24.85 an ounce, after hitting a near four month low on Tuesday.
Oanda's Moya attributed silver's weakness to concerns over the impact of Delta variant on the metal's industrial demand.
But, "once emerging markets have more vaccines in place and COVID-19 appears more contained, industrial demand should pick-up and silver could outperform gold this year."
Palladium gained 0.7% to $2,625.64 and platinum rose 0.6% to $1,057.08.
(Reporting by Nakul Iyer in Bengaluru; Editing by Anil D'Silva and Barbara Lewis)
By Nakul Iyer
