Oct 27 (Reuters) - Gold prices fell on Tuesday as a stronger dollar weighed on bullion, while investors awaited the US Federal Reserve's policy meeting for clues on the interest-rate outlook, including the possibility of future hikes, even as the central bank is widely expected to stand pat this week.
Spot gold dropped 0.4% to $4,000.52 per ounce by 1042 GMT. U.S. gold futures for December delivery fell 0.6% to $4,014.40 per ounce.
The US dollar (.DXY), rose 0.3% against a basket of major currencies, hitting a nearly two-week high and making dollar-priced gold more expensive for holders of other currencies.
"Gold remains under pressure from a stronger US dollar and elevated Treasury yields, as persistent inflation concerns, driven by high oil prices, reinforce expectations that the Federal Reserve will maintain a restrictive monetary policy stance," said Ricardo Evangelista, ActivTrades director and CEO.
Oil prices rose on Tuesday, with Brent crude hovering around $116 a barrel, as renewed Houthi attacks on Saudi Arabia highlighted persistent supply risks in the Middle East.
Policymakers have signaled they will not raise rates this week, but with persistent inflation concerns still in focus, investors believe the pause will not last long.
Traders are pricing in an 82% probability of a US rate hike in December, according to the CME's FedWatch Tool.
The outlook for global monetary policy remains in focus as other major central banks also meet this week. The Bank of Japan's meeting follows the Fed's, while the European Central Bank is set to leave rates unchanged on Thursday.
Higher rates increase the opportunity cost of holding non-yielding gold.
Investors also await US Personal Consumption Expenditures data due on Thursday, the gauge the Fed watches most closely as it targets 2% inflation.
"A hawkish message or stronger-than-expected PCE inflation could push gold below $4,000, potentially towards $3,900," Evangelista added.
Among other metals, spot silver fell 1.3% to $53.23 per ounce, platinum lost 1.7% to $1,501.30 and palladium dropped 2.9% to $1,019.50.
Reporting by Sherin Sans in Bengaluru; Editing by Sonia Cheema and Jonathan Ananda
