A man carries gold bricks at SJC gold factory in Ho Chi Minh city, Vietnam.  (Reuters Photo)

BENGALURU- Gold prices hovered near a record high on Tuesday, ahead of the anticipated start of the US interest rate reduction cycle, which could see policymakers deliver an outsized cut.

Spot gold was steady at $2,581.68 per ounce. Bullion rose to a record high of $2,589.59 on Monday.

US gold futures were also steady at $2,608.60.

“The rally in gold prices has taken a breather in today’s session,” said IG market strategist Yeap Jun Rong, adding that after recent gains driven by expectations of a more aggressive rate cut, there’s now some caution as investors await further clarity from policymakers.

All attention is on the US Federal Reserve’s two-day policy meeting, which concludes on Wednesday. Markets are currently pricing in an 66 percent  probability of a 50-basis-point easing, compared with 43 percent  on Friday.

Zero-yield bullion tends to be a preferred investment amid lower interest rates.

Gold prices might see a correction, even a 50 bp cut this week might lead to initial weakness as expectations are met and recent long positions are reduced, said Nicholas Frappell, global head of institutional markets at ABC Refinery.

The dollar was down 0.1 percent, making gold less expensive for other currency holders.