BENGALURU: Gold edged slightly lower on Wednesday as the dollar and equities firmed ahead of the US Federal Reserve's policy decision due later in the day when it is expected to keep interest rates unchanged.

The Fed is likely to defer any possible increase until September or December, as policymakers hold out for more evidence of a pickup in inflation.

Asian stocks settled near one-year highs on Wednesday while the safe-haven yen slumped after Japan's government announced a larger-than-expected economic stimulus package, which led most of the region's bourses higher.

The dollar was up 1 percent against the yen, after falling 1.1 percent in the previous session, on expectations of significant monetary stimulus by the Bank of Japan later in the week.

Spot gold slipped 0.1 percent to $1,317.96 an ounce at 0641 GMT. Bullion rose 0.4 percent on Tuesday.

US gold fell 0.2 percent to $1,317.90 an ounce.

"Prices are going to remain on the sidelines leading into the meeting. Certainly, the pricing on the probability of a hike is probably low," said ANZ analyst Daniel Hynes.

"Investors are mindful of the macro environment, which is broadly positive. For the moment, it is a wait and see environment."

US consumer confidence held steady in July and new single-family home sales hit their highest level in nearly 8-1/2 years in June, suggesting sustained momentum in the economy that could allow the Federal Reserve to raise interest rates this year.

"We suspect that the Fed statement out on Wednesday will be benign enough to leave the current "higher rates" scenario pretty much in place," INTL FCStone analyst Edward Meir said in a note.

"And with other central banks backing away from further additional easing measures - at least for now - gold could find itself on the defensive for the balance of the week."

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which the precious metal is priced.

Spot gold is biased to break a support at $1,313 per ounce and fall towards the next support at $1,298, as its consolidation above $1,313 is ending, according to Reuters technical analyst Wang Tao.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.46 percent to 954.24 tonnes on Tuesday.

Among other precious metals, palladium, which hit a nine-month high of $694.30 on Tuesday, was down 0.1 percent at $686.40 an ounce.

Silver was down 0.4 percent at $19.55, while platinum was little changed at $1,091.40 an ounce.