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- Gold prices pared gains on Tuesday due to an uptick in the U.S. dollar and bond yields, although investors remained wary of more hefty interest rate hikes from the Federal Reserve.

Spot gold was up 0.1% at $1,651.60 per ounce by 1104 GMT, while U.S. gold futures fell 0.4% to $1,657.70.

"Any gain (in gold) is temporary, until the market anticipates the Fed to slow down its tightening pace," said Giovanni Staunovo, a commodity analyst at UBS.

While the dollar's weakness in early trade supported gold, bullion prices are expected to hit $1,600 by the end of the year with elevated U.S. inflation and the Fed still pursuing an aggressive monetary policy tightening, Staunovo said.

The dollar index steadied after hitting a 1-1/2-week low earlier in the day, making gold less attractive for overseas buyers. [USD/]

Gold prices have fallen nearly 10% so far this year, as consecutive U.S. rate hikes boosted bond yields and the dollar, while increasing the opportunity cost of holding gold, which is otherwise seen as an inflation hedge.

Further, another 75-basis-point Fed rate hike is expected next month after red-hot inflation data for September.

"Gold is struggling for direction this morning as investors evaluate the risk of slowing global growth against the Fed's aggressive tightening path," FXTM analyst Lukman Otunuga said.

The metal is likely to swing between losses and gains until a fresh directional catalyst is brought into the picture, Otunuga said, adding that "should prices slip back below $1,640, this could open a path toward $1,615 and $1,600."

Meanwhile, UK's blue-chip and mid-cap indexes hit their highest levels in more than a week, lifted by a historic reversal of the government's unfunded tax cut plans and earnings optimism that boosted Wall Street indexes overnight.

Elsewhere, spot silver rose 0.2% to $18.7181 per ounce, while platinum was little changed at $918.75. Palladium rose 0.7% to $2,014.58.