Gold regains ground as investors strap in for Fed policy meet

By Anjana Anil

(Reuters) - Gold prices firmed after dipping to one-week lows on Monday as investors awaited a series of central bank meetings this week, including the U.S. Federal Reserve's policy decision on Wednesday, to pick up on clues on inflation and interest rates.

Spot gold was up 0.2% at $2,159.69 per ounce at 2:20 p.m. EDT (1820 GMT) after hitting its lowest level since March 7 earlier in the session. Bullion had hit a record high of $2,194.99 on March 8.

U.S. gold futures settled 0.1% higher at $2,164.3.

"Gold is in anticipation of the interest rate decision on Wednesday, but also maybe the Bank of Japan's interest rate decision tonight - it can show that globally inflation is rising and obviously gold is a global inflation hedge," said Daniel Pavilonis, senior market strategist at RJO Futures.

Bullion fell about 1% last week after data showed that U.S. consumer prices increased solidly in February and producer prices rose more than expected, indicating some stickiness in inflation.

Although gold is traditionally considered an inflation hedge, higher interest rates to rein in the elevated prices discourage investment in bullion since it pays no interest.

The Bank of Japan is expected to exit its ultra-dovish monetary policy at its two-day meeting ending on Tuesday.

The Bank of England will hold its meeting on Thursday and is expected to stay put on rates.

Markets also widely anticipate no change in interest rates at the end of Fed's two-day policy meeting on Wednesday, but are pricing in a 53% chance of a rate cut in June.

"The changes in the dot plot, the expectations of the Fed funds, I think is going to play a role in whether or not gold will resume and continue its uptrend," Pavilonis added.

Spot silver fell 0.4% to $25.06, platinum lost 1.8% to $916.19 per ounce and palladium dipped 4.2% to $1,031.73.

(Reporting by Anjana Anil in Bengaluru; Editing by Mark Potter, Josie Kao and Ravi Prakash Kumar)