Gold slips as Fed meeting looms, but set for third monthly gain

Gold prices have gained 3.3% so far this month after hitting a record high of $2,431.29 earlier in April.

The dollar rose 0.3% against its rivals, making gold more expensive for other currency holders, while 10-year also climbed.

"A lot of traders have a lot of profit locked up in gold and silver, and they're willing to get to the sidelines into the Fed announcement," said Bob Haberkorn, senior market strategist at RJO Futures.

"However, there's been a lot of Asian demand and strong central bank demand. We had flight to safety the last two years. So gold market is definitely in a bullish position right now and it continue to move forward for the remainder of the year."

The U.S. central bank begins its two-day meeting on Tuesday, where it is expected to hold rates at 5.25%-5.5%. All eyes are on Fed Chair Jerome Powell's speech on Wednesday for more cues on rate-cut projections.

Traders have pared back bets of Fed rate cuts this year due to recent hotter-than-expected U.S. economic data and sticky inflation.

Powell's stance may be strongly hawkish, pushing expectations of a first rate cut to the fourth or even to next year - this scenario would bode badly for gold, said Ricardo Evangelista, senior analyst, ActivTrades.

Meanwhile, spot palladium dropped more than 4% to a near two-month low of $934.06 per ounce, reaching parity with the sister metal platinum, which is down 1.6% at $932.45.

Spot silver fell 3% to $26.30 per ounce.