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By Nakul Iyer

Gold prices fell on Wednesday, hurt by elevated U.S. bond yields and a firmer dollar, as markets turned their attention to the outcome of the Federal Reserve's monetary policy meeting later in the day.

Spot gold was down 0.2% at $1,727.49 per ounce by 1301 EDT. U.S. gold futures also eased 0.2% to $1,726.60.

Benchmark U.S. Treasury yields scaled a new 13-month high, sapping non-yielding gold's appeal. The dollar index also advanced and raised the cost of holding gold for other currency holders.

"Gold has increasingly been held hostage by Treasury markets," TD Securities commodity strategist Daniel Ghali said.

The current regime, where variations in real rates are driven by variations in nominal rates as opposed to inflation expectations, is not particularly conducive to rising gold investment flows, he added.

Gold prices have come under pressure this year as a recent spike in 10-year U.S. Treasury yields weighed on the non-yielding commodity.

All eyes are on a policy statement from the Fed scheduled for release at 1800 GMT, followed by a news conference from Fed Chair Jerome Powell.

"Powell will (likely) state that inflationary pressures will probably be temporary and not that big," said David Madden, analyst at CMC Markets UK. "That will probably push up 10-year yields, the dollar and hurt gold a bit."

Madden added however that the Fed would likely also signal an intention to maintain low interest rates, cushioning gold's losses and providing some support.

Cryptocurrencies also appear to have stolen gold's thunder, especially due to possible wider acceptance from institutional investors, ING analyst Wenyu Yao said in a note.

Silver fell 0.1% to $25.93 an ounce. Palladium rose 1.5% to $2,535.10, having hit a one-year high of $2,542.26 earlier, and platinum dropped 1.2% to $1,197.43.

(Reporting by Nakul Iyer in Bengaluru; Editing by Mark Potter and Jan Harvey)