Picture used for illustrative purpose. File

Gold eased on Wednesday as the dollar briefly halted its slide and investors booked profits from a record rally, with some caution setting in as focus turned to a US Federal Reserve meeting widely expected to reinforce loose monetary policy.

Spot gold was down 0.4% at $1,951.24 per ounce by 0601 GMT. Prices hit an all-time high of $1,980.57 on Tuesday. U.S. gold futures rose 0.1% to $1,947.40.

Gold is closely following moves in the dollar, which has halted its fall, said DailyFx currency strategist Ilya Spivak.

"As we get closer to the Fed announcement and the event risk, the market will get a bit more wary," Spivak added.

The dollar index was little changed at 93.668 , having touched its lowest level since June 2018 this week. A weaker dollar, also considered a rival safe haven, makes gold cheaper for holders of others currencies. 

Coronavirus cases continued to surge in the United States and stood at over 16.6 million globally. 

READ MORE 

Tokyo stocks close lower as yen rises

UK travel stocks plunge on pandemic blues after quarantine move on Spain

Pakistan registers 91% growth in foreign direct investment

Its intensifying spread and an escalation in US-China tensions have dented hopes of quick economic recovery, and have been driving inflows to safe-haven assets like gold, which has risen more than 28% so far this year.

The Fed will publish its interest rate decision at 1800 GMT, widely expected to keep rates unchanged, following which Chair Jerome Powell is scheduled to hold a press conference.

"I expect the Fed to maintain its uber-dovish tone and this will support precious metals prices," said Jeffrey Halley, a senior market analyst at OANDA.

Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding non-yielding bullion.

It's also considered a hedge against inflation and currency debasement as central bank pump out stimulus.

Republicans in the White House and the U.S. Congress struggled to reach a deal over a $1 trillion aid plan. Elsewhere, silver dropped 1.7% to $24.16 per ounce, platinum fell 1.3% to $936.09 and palladium slipped 0.6% to $2,269.22.

Reuters