Spot gold was at $1,710.00 an ounce at 1510 GMT, little changed from $1,711.59 late in the previous session. US gold was down 0.2 percent at $1,710.80 an ounce. "(We're) consolidating ahead of the Fed tomorrow, trading in line with the broader market," VTB Capital analyst Andrey Kryuchenkov said. "They will remain accommodative (and are) likely to talk inflation down."
Gold prices reached a high of $1,714.20 an ounce in early trade after European shares rallied to 18-month highs and the euro strengthened, after data showed German investor confidence unexpectedly rose in December after a sharp fall a month before. But moves were limited as traders took to the sidelines in anticipation of Wednesday's Fed announcement. Gold has risen 9 percent so far this year as central banks, including the Fed and the Bank of Japan, pursue monetary easing policies.
Gold benefits from an easy monetary policy as investors fear that repeated cash printing will damage the value of currencies, prompting them to seek safety in hard assets such as bullion. "If the Fed comes out with $45 billion of bond purchases, it could be the spark we need for another gold rally," Mitsubishi analyst Matthew Turner analysts.
Gold premiums in Hong Kong rose to their highest in about five months on Tuesday as Chinese banks stocked up on bullion to avoid a supply crunch when refineries close shop for the year-end holidays. China is currently vying with India as the world's number one gold consumer, after Indian demand fell 24 percent in the first three quarters of the year.
South Africa's gold output nearly halved in October from the same period last year, highlighting the impact of a wave of wildcat strikes that swept the sector, data showed on Tuesday. Both platinum and palladium hit multi-month highs in the previous session, encouraged by strength in base metals and a bright outlook for the Chinese economy.
Spot platinum was up 0.6 percent at $1,627.74, off Monday's peak of $1,625, its highest since mid-October. Spot palladium, which hit a three-month high of $702.50 on Monday, was down 0.6 percent at $692.72. The metal is in overbought territory after rising around 15 percent in the last month, outstripping gains in other precious metals. Silver was down 0.8 percent at $32.92 an ounce.