Gold steadies in Europe

Gold held steady above $1,230 an ounce on Wednesday ahead of a hotly anticipated Federal Reserve statement on monetary policy, with traders awaiting further clues on the timing of further US interest rate increases. In an announcement due at 1800 GMT, the Fed is expected to clarify policymakers' willingness to proceed with the rate hiking process they kicked off in December.
Since then, volatility in equities and oil prices, a raft of mixed economic data, and concerns over global growth have curbed expectations for further hikes, allowing gold to rise 16 percent this year.
It peaked at $1,282.51 an ounce on Friday, but has struggled to maintain gains as traders await further direction from the Fed.
Spot gold was at $1,231.53 an ounce at 1500 GMT, little changed from late on Tuesday, while US gold futures
for April delivery were down 20 cents an ounce at $1,230.80.
Fed policymakers are expected to leave short-term interest rates unchanged but also to signal that a rate hike is not too far off as long as the job market and inflation continue to improve.
"It would be a surprise if the Fed lifted rates today, though given the recent run of positive employment data, and today's positive CPI data, the current expectation is that the next rate hike may take place mid-year," Mitsubishi analyst Jonathan Butler said.
"Fed funds futures are currently pricing in the highest probability of the next hike being in July."
Gold is highly sensitive to the prospect of rising rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. The dollar rose against a basket of currencies after data showed US core inflation increased more than expected in February, and US housing starts beat expectations for the month. Investors are positioning for fresh guidance from the bank.
"Key to the policy outlook will be the FOMC's assessment of the outlook for inflation," HSBC said in a note. "If the Committee drops its expectation of 'low' inflation in the near term, it would... be a signal that the policymakers no longer see too low inflation as a barrier to a rate hike."
The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, said its holdings rose 2.1 tonnes on Tuesday, after the fund reported its biggest one-day outflow since early December on Monday.
Silver was flat at $15.27 an ounce, while platinum was up 0.4 percent at $959.20 an ounce and palladium was up 1.3 percent at $572 an ounce.