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Gold traded flat on Tuesday as investors had largely priced in a Federal Reserve rate cut, while bracing for signals that the U.S. central bank may pursue a milder-than-expected easing cycle at its two-day policy meeting starting later in the day.

Spot gold held steady at $4,186.99 per ounce, as of 0231 GMT. U.S. gold futures for December delivery fell 0.1% to $4,215.80 per ounce.

Investors are largely repositioning ahead of the Federal Reserve's policy meeting, OANDA senior market analyst Kelvin Wong said.

"Earlier in the month, Powell signaled hawkish rate-cut guidance during his press conference. So investors in the U.S. Treasury market are adjusting their positions."

The benchmark U.S. 10-year Treasury yields touched a 2-1/2-month peak on Monday. Higher U.S. Treasury yields increase the opportunity cost of holding non-yielding assets like bullion.

Analysts widely expect a "hawkish cut" this week accompanied by guidance and forecasts that signal a high threshold for further easing into next year.

Last week, data showed the U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, landed in line with expectations, while consumer sentiment improved in December. Private payrolls recorded their sharpest drop in more than 2-1/2 years, but jobless claims fell to a three-year low.

Markets now assign an 87% probability of a quarter-point cut at the Fed's December 9–10 meeting, down from 90% on Monday, according to CME's FedWatch Tool.

Lower interest rates tend to favour non-yielding assets such as gold.

Elsewhere, silver was flat at $58.10 per ounce, after hitting a record high of $59.32 on Friday.

"Right now, silver is more of a higher-beta play among precious metals," Wong said, adding that low inventories, strong industrial demand, and expectations of Fed rate cuts are driving its momentum, pushing it into risk-on mode and outperforming gold.

Platinum gained 0.5% to $1,650.20, while palladium rose 0.4% at $1,471.25.