Gold prices slipped on Tuesday, weighed down a spike in US Treasury yields and a stronger dollar as investors waited for more clues about the Federal Reserve's interest rate hike timeline from its policy meeting next week.

Spot gold fell 0.7% to $1,806.72 per ounce by 1325 GMT. US gold futures fell 0.6% to $1,806.

"Despite the spike higher in US Treasury yields, spot gold seems to be holding its own above $1,800 for the time being," said Han Tan, chief market analyst at Exinity.

"However, the higher Treasury yields go, that should test bullion's ability to tread water above the psychologically-important $1,800 mark."

Benchmark 10-year US Treasury yields climbed to a two-year high, while the dollar rose 0.2% against its rivals, making gold more expensive for other currency holders.

Global investor attention remains fixed on the Fed's Jan. 25-26 meeting after central bank officials signalled they would start raising interest rates in March to curb inflation.

Gold is considered an inflationary hedge, but the metal is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-interest bearing bullion.

Gold steadies as weak US data offsets firmer dollar

"Currently, inflation risks are keeping some investors holding onto their gold investments, but we think further upside to US real yields and a stronger US dollar will undermine the supportive factors over the coming quarters," UBS analyst Giovanni Staunovo said.

The Bank of Japan raised its inflation forecast for the fiscal year beginning in April and said risks to the price outlook were evenly balanced.

European shares touched their lowest level in over a week, with tech stocks weighing the most, as a rise in two-year US Treasury yields reflected ramped-up bets for a US policy rate hike as soon as March.

Spot silver fell 0.7% to $22.84 an ounce, platinum fell 0.5% to $967, while palladium rose 1.5% to $1,902.69.