By Nakul Iyer
June 16 (Reuters) - Gold prices traded in a tight range on Wednesday as the possibility that the Federal Reserve may hint at an early tapering of its bond-buying support for the U.S. economy set a cautious tone in the market.
Spot gold XAU= was little changed at $1,860.21 per ounce at 10:01 a.m. EDT (1401 GMT), having declined to its lowest level since May 17 at $1,843.99 on Monday.
U.S. gold futures GCv1 rose 0.2% to $1,859.20.
In a new statement and economic projections due on Wednesday, Fed policymakers could discuss when and how fast to pare back the central bank's massive bond-buying program in the face of a recovering economy and rising inflation.
"The markets are realizing that the economic recovery is pretty robust and what we're probably going to see is this (Fed)tapering discussion is going to start now," said Edward Moya, senior market analyst at OANDA.
While the Fed is expected to make an announcement that it is tapering its asset-buying program at the end of the summer or in September, it will likely remain fairly accommodative over the next 12 months, which should support gold, Moya said, adding that inflation fears could also boost bullion's appeal.
Concerns about rising prices have risen in the face of U.S. data showing a recent spike in consumer and producer prices.
StoneX analyst Rhona O'Connell said in a note that market participants will also focus on any comments over inflation risks, as some corners of the market are convinced the Fed is underestimating the chance that inflation could be persistent.
Gold was also pressured by a steady dollar, which dimmed the precious metal's appeal to other currency holders. USD/
Elsewhere, silver XAG= rose 0.5% to $27.78 per ounce, while palladium XPD= gained 1.3% to $2,797.84 and platinum XPT= was down 0.7% at $1,144.99.
(Reporting by Nakul Iyer in Bengaluru Editing by Paul Simao)
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