Jan 29 (Reuters) - Gold prices firmed on Monday as growing concern over the Middle East bolstered bullion's safe-haven appeal while markets await this week's U.S. Federal Reserve policy meeting for a steer on interest rate expectations.
Spot gold gained 0.5% to $2,029.10 an ounce by 1325 GMT and U.S. gold futures were up 0.6% at $2,029.50.
"Despite the escalation in Middle East conflict, gold didn't really escape the narrow range. This means that what markets are still really focusing is on the Fed's monetary policy and the likely path of interest rate cuts," said Ricardo Evangelista, senior analyst at ActivTrades.
Commodities trader Trafigura on Saturday said it was assessing the security risks of further Red Sea voyages after firefighters put out a blaze on a tanker attacked by Yemen's Houthi group a day earlier.
Gold is considered a safe store of value amid political and economic turmoil.
The Fed's policy decision is due on Wednesday, having made a dovish tilt in the December meeting. Markets are widely expecting the U.S. central bank to leave rates unchanged at the end of the two-day meeting.
Data on Friday showed gentle growth in U.S. prices in December, keeping annual inflation below 3% for a third consecutive month, potentially allowing the Fed to begin cutting interest rates this year.
"In the short term, we expect the market to stay range-bound; but further out we see Fed rate cuts driving stronger ETF demand ... So we suggest buying on dips at or below $2,000/oz," UBS analysts said in a note.
In other precious metals, spot silver was up 1% at $23.02 an ounce, platinum fell 0.4% to $909.16 and palladium rose 0.4% to $959.04.
