By Anushree Mukherjee
Oct 20 (Reuters) - Gold prices were largely steady in a volatile session on Tuesday as investors awaited next week's Federal Reserve meeting for further direction on US interest rates.
Spot gold was unchanged at $4,138.54 per ounce by 11:19 am EDT (1519 GMT). US gold futures for December delivery dropped 0.1% to $4,157.90 per ounce.
"Inflation and the Fed's interest rates are the big stories that gold's fighting at the moment. US Treasuries do appear more favorable than gold as a safety
asset for the moment," said Bob Haberkorn, senior market strategist at StoneX.
"$4,000 is a big level for (gold) to keep an eye on and see if it can hold. A lot of that, at the moment, is going to be dependent on what the Fed says," Haberkorn said.
The Fed raised interest rates by a quarter point in September, its first hike this year.
While recent comments from Fed officials signaling little urgency for further policy tightening have tempered expectations of a rate hike at the central bank's October 27-28 policy meeting, traders see a 92% chance of a hike in December, according to CME's FedWatch Tool. [FEDWATCH]
Gold is still down around 26.4% from its record high of $5,594.82 in January and roughly 22% from levels at the start of the Iran war, when concerns over energy inflation reinforced bets on interest rate hikes.
Gold is traditionally seen as an inflation hedge, but it loses its appeal as a non-yielding asset in a high-interest-rate environment.
Investors are also watching next week's US Personal Consumption Expenditures (PCE) data, the Federal Reserve's preferred inflation gauge, for clues on whether inflation pressures remain persistent and how that could shape the rate outlook.
In Japan, central bank Governor Kazuo Ueda said underlying inflation was "quite close" to the 2% target, signaling scope for further rate hikes.
Among other metals, spot silver rose 1.5% to $57.92 per ounce, platinum gained 0.7% to $1,651.36 per ounce and palladium dropped 0.2% to $1,117.75 per ounce.
(Reporting by Anushree Mukherjee and Vishak Mathew in Bengaluru, additional reporting by Noel John; Editing by Shailesh Kuber and Will Dunham)
