Investing.com– Gold prices rose slightly on Tuesday, steadying after a sharp drop in the prior session as anticipation of a Federal Reserve meeting  and more cues on interest rates kept traders biased towards the dollar.

Among industrial metals, copper prices sank further amid persistent concerns over slowing Chinese demand. The prospect of increased production from a joint deal between BHP and Lundin Mining (OTC:) to take over Filo Corp and expand its South American copper projects also weighed on the red metal.

Gold was pressured by an overnight increase in the dollar, which saw some long positioning ahead of Wednesday’s Fed rate decision. rose 0.1% to $2,387.98 an ounce, while expiring in December rose 0.2% to $2,431.35 an ounce by 00:25 ET (04:25 GMT). 

Gold steadies, Fed awaited for rate cut cues

The yellow metal steadied from sharp swings in recent sessions, having briefly hit record highs earlier in the month on some safe haven demand. 

But gold was dragged off these record highs as market focus turned squarely towards U.S. interest rates. While lower rates do benefit precious metal prices, any signs to the contrary present additional risk to the sector.

This caution kept traders biased towards the dollar, with the Fed set to kick off a two-day meeting later on Tuesday.

The central bank is widely expected to at the conclusion of the meeting on Wednesday. But any signals on when it plans to begin trimming rates will be closely watched. 

Markets are broadly pricing in a 25 basis point cut in September, but further rate cuts remain in doubt.

Other precious metals rose but were nursing steep losses in recent sessions. rose 0.3% to $962.55 an ounce while rose 0.7% to $28.055 an ounce. 

Copper near 4-mth low amid China jitters, higher output outlook 

Benchmark on the London Metal Exchange fell 0.5% to $8,980.0 a tonne, while one-month fell 0.9% to $4.0585 a pound. Both contracts were at near four-month lows. 

The red metal was nursing steep losses over the past month as persistent concerns over slowing Chinese demand battered sentiment towards copper. Purchasing managers index data on Wednesday is set to provide more cues on China.

But the prospect of increased supply also weighed on copper. 

BHP Group Ltd (ASX:)- the world’s biggest miner- and Canada’s Lundin Mining Corporation (TSX:) announced a $4 billion joint deal to take over South America-focused copper miner Filo Mining Corp (TSX:), with a view to expand its projects in the region and increase copper production.