By Ambar Warrick 

-- Gold prices hovered around a one week low on Tuesday, while the dollar steadied as traders hesitated from making big bets ahead of key U.S. consumer inflation data that is expected to set the tone for U.S. monetary policy in the coming months. 

Prices of the yellow metal fell sharply on Monday, unwinding some recent gains as traders locked in profits ahead of the highly-awaited reading. While the (CPI), which is due at 08:30 ET (13:30 GMT), is expected to show that inflation eased further in November, markets are wary of any unexpected strength in the reading.

The U.S. , which gauges manufacturing inflation, eased less than expected in November, raising fears of a similar trend in the CPI. 

was flat at $1,782.17 an ounce, while steadied around $1,793.10 an ounce. Both instruments sank over 1% on Monday. 

A stronger-than-expected inflation reading is likely to elicit a hawkish response from the Federal Reserve- a move that could push up the and , while heralding more pressure on metal markets. The greenback steadied above a five-month low on Tuesday. 

While the central bank is set to at the conclusion of a two-day meeting on Wednesday, its guidance on where interest rates will peak will be closely watched. The Fed hiked rates by a total 375 bps this year, which weighed heavily on gold by driving up the opportunity cost of holding the yellow metal. 

While the central bank signaled it will raise interest rates at a slower pace in the coming months, it also warned that interest rates could peak at much higher levels if inflation shows little signs of easing.

Other precious metals were mildly positive on Tuesday after logging sharp losses in the prior sessions. rose 0.1%, while added 0.5%.

Among industrial metals, copper prices edged higher after falling sharply in the prior session.  

rose 0.2% to $3.8137 a pound, recovering from a 1% drop.  

The red metal is expected to see volatile trade in the coming weeks amid uncertainty over how major importer China will carry out an economic reopening from nearly three years of COVID lockdowns.

While the country relaxed several movement and quarantine measures, it is still coping with its worst ever outbreak.