Gold prices saw a modest increase as investors adopt a wait-and-see approach ahead of the Federal Reserve's interest rate decision and a speech by Chairman Kevin Warsh.

Market expectations are divided, with Soojin Kim, an analyst at Mitsubishi UFJ Financial Group, noting that the market currently assigns roughly a one-third probability to a 25-basis-point rate hike. Policymakers face a challenging balancing act, as the cooling inflation data from June is offset by renewed price pressures stemming from rising oil costs.

Since the onset of the conflict, gold prices have fallen by nearly 25%. However, persistent buying on dips has provided support for the precious metal around the $4,000 per ounce mark.

Metals analyst Tony Sage commented that a hawkish monetary policy environment continues to weigh on precious metals as the Fed's decision approaches. He stated that the market is currently pricing in two rate hikes by the Fed this year, which could support bond yields and diminish gold's appeal. He added that other major central banks, including the Bank of Japan and the Bank of England, are also expected to raise interest rates this year.

During European morning trading, New York gold futures rose 0.2% to $4,045.80 per troy ounce.