Gold slips as investors weigh Fed rate outlook

Oct 20 (Reuters) - Gold slipped in early Asian trade on Tuesday as investors awaited the US Federal Reserve policy decision next week for signals on interest rates and the broader outlook for monetary policy.

FUNDAMENTALS

* Spot gold fell 0.3% to $4,126.84 per ounce by 0102 GMT, while US gold futures for December delivery dropped 0.3% to $4,146.00.

* Investor focus has shifted to the Fed's October 27-28 policy meeting and next week's US Personal Consumption Expenditures (PCE) data, a key gauge closely watched by the central bank as it targets 2% inflation.

* The US central bank in September raised its benchmark overnight interest rates by 25 basis points to the 3.75%-4.00% range.

* According to CME's FedWatch Tool, traders are pricing in an 83% chance that the central bank will leave rates largely unchanged next week, while expectations for a hike in December remain at 94%.

* Bank of Japan Governor Kazuo Ueda said underlying inflation is "quite close" to the central bank's 2% target with strong global AI demand adding to inflationary pressure from a tight job market, signalling scope for further rate increases.

* Higher interest rates typically weigh on gold prices because they increase the opportunity cost of holding bullion, which does not pay interest.

* On the geopolitical front, Yemen's Iran-aligned Houthis said on Monday they carried out several attacks against Saudi energy, airport and military targets.

* Among other metals, spot silver slid 0.7% to $56.69 per ounce, platinum steadied at $1,639.65 and palladium dropped 0.7% to $1,112.08.