Shafaq News/ Gold inched higher on Tuesday, as expectations that a large U.S. stimulus package would be passed eventually boosted the metal's appeal as a hedge against inflation, although a stronger dollar capped gains.

Spot gold rose 0.1% to $1,856.33 per ounce by 0549 GMT. U.S. gold futures gained 0.1% to $1,856.80.

U.S. Senate Majority Leader Chuck Schumer told MSNBC that Democrats may try to pass much of a $1.9 trillion coronavirus relief bill using a procedural manoeuvre to bypass a Republican filibuster.

"If we get the stimulus, gold can break through $1, 900," said Stephen Innes, chief global market strategist at financial services firm Axi. "The quicker the package gets delivered, the more favorable it's for gold. Whether it's a smoother process or not, the market doesn't care."

Further supporting gold, U.S. 10-year Treasury yields hovered near a three-week low touched in the previous session, but the dollar rose 0.1%, making gold expensive for other currency holders.

The U.S. Federal Reserve's two-day policy meeting is set to begin later in the day.

"The Fed is cognizant that the world economy is still struggling and that will have a negative knock-on effect on the domestic market ... so, it will indicate low Fed funds rates for quite a long time and push back on tapering," Innes said.

Easy monetary policy adds pressure on government bond yields and benefits non-yielding gold.

Despite expectations that the Fed will stand pat on monetary policy investors will keep a close watch on its tone.

"If the Fed signals that they're not looking to expand stimulus, and puts the seeds out there that they might have to consider exiting sooner than they currently think ... that could be very detrimental for gold," said DailyFX currency strategist Ilya Spivak.

Silver was steady at $25.30 an ounce, platinum lost 1.3% to $1,084.10, and palladium fell 0.1% to $2,333.02.

Source: Reuters