* ASX 200 drops 0.7%, lowest levels in a week

* Gold stocks tumble most, down 2.9%

* Fed seen signalling early end to tapering

Dec 15 (Reuters) - Australian shares ended lower on Wednesday as cautious investors refrained from placing big bets ahead of outcome of the U.S. Federal Reserve's two-day policy meeting, possibly adding to the pressure on its peers for further tightening.

The S&P/ASX 200 index closed 0.7% lower, marking its worst session since Dec. 2.

Stock markets across Asia skidded in anticipation that the U.S. central bank would stop buying assets after a hotter-than-expected inflation readings for November.

The rapid spread of the Omicron variant is an added complication that could incline the Fed to be less hawkish, though recently officials have sounded more concerned about the persistence of inflation than the pandemic.

"The dual threat of increasing virus cases and inflation dampened expectations of the Australian economy entering 2022 on a firm footing," said Kunal Sawhney, chief executive officer, Kalkine Group.

Weakness prevailed among all major sub-indexes on the Australian bourse, with gold and tech stocks losing the most.

Tech stocks closed 2.6% lower, tracking their U.S. peers, after touching the lowest levels since Dec. 6 earlier in the session.

Buy-now-pay-later firm Afterpay Ltd lost 3.3%.

Gold stocks were the biggest laggards, dropping 2.9%, with Evolution Mining falling the most in the sub-index. The miner's stock dropped 5.2% to post its worst session since Sept. 28.

Aussie miners slipped 0.9% on weak iron ore prices.

With an exception of Rio Tinto, which closed 0.2% higher, BHP Group and Fortescue Metals fell 0.5% and 0.3%, respectively.

New Zealand's benchmark S&P/NZX 50 index extended losses into a second session, ending 0.5% lower.

"While the RBNZ has welcomed interest rate hikes for a second time in a row in 2021, increasing inflationary pressures continue to remain a cause of concern for the economy," Sawhney added.

(Reporting by Savyata Mishra in Bengaluru; Editing by Sherry Jacob-Phillips)