Gold slips as equities and dollar surge ahead of Fed meeting

The Fed, which starts its two-day meeting on Tuesday, is expected to announce the start of a program to taper its multi-trillion-dollar bond holdings built up during the financial crisis.

At a two-day meeting beginning later on Tuesday, the US central bank is expected to take another step toward policy normalisation with plans to trim its massive portfolio.

While inflation has perked back up a bit, largely because of higher oil prices, it's still below the Fed's 2% target.

US central bank leaders are expected to hold the key interest rate steady this week, but they may begin trimming a huge bond-buying program that was meant to boost economic growth.

"The trend in inflation has taken a downtick". In a speech early this month, influential New York Fed President William Dudley said while he was surprised that inflation had been so low, steady growth of the economy should eventually push wages higher, allowing the Fed to continue to raise rates "gradually".

Moreover, while Fed officials have expressed a desire to return to a Treasurys-only portfolio, meaning they would unload all of the mortgage-backed securities they purchased in recent years, that will take a long time under the plan the Fed is preparing to set into motion. On Wall Street, the futures for the Dow Jones industrial average and for the Standard & Poor's 500 were up 0.2 percent.

Ten of the 11 major S&P sectors were higher, led by a 0.59 percent gain in the financial index.

US government bond yields US10YT=RR jumped a hefty 14 basis points last week, but were little changed on Monday, as were most developed bond markets.

Shares of Orbital ATK hit a record high after Northrop Grumman said it would buy the missile and rocket maker for about $7.8 billion in cash.

South Korean shares dipped 0.1 percent, against a backdrop of caution ahead of the Fed meeting as well as continuing tensions on the Korean peninsula.

Advancing issues outnumbered decliners on the NYSE by 1,723 to 996. On the Nasdaq, 1,857 issues rose and 999 fell.

Down Under, the S&P/ASX 200 advanced 0.13%, with the heavily-weighted financials sub-index climbing 0.37%.

At 10:18 a.m. ET (1418 GMT), the Toronto Stock Exchange's S&P/TSX composite index was up 49.97 points, or 0.33 percent, at 15,223.00. Yields on 10-year Japanese bonds remain near zero, while those on German bunds are the least attractive versus Treasuries in nearly a year.

London .FTSE , Frankfurt .GDAXI and Paris .FCHI fluttered between flat to slightly lower after eight days of gains in the previous nine and a more 4 percent jump .FTEU3 in the last three weeks.

The gold mining portion of the group weighed, with Kinross Gold Corp falling 1.9 percent to C$5.77 after saying it would spend more than $1 billion to expand two gold mines.

FED WATCH: Investors are looking ahead to this week's Fed policy meeting for indications on the timing of the next rate hike and when the Fed might start shrinking its multitrillion-dollar stockpile of bonds.

In Europe, the eye-catching move was a sharp slide in Portuguese yields - and rise in prices - after the country regained an investment grade rating after 5-1/2 years. India's Sensex gained 0.6 percent to 32,472.62.

Canada's benchmark stock index notched a gain of more than 1 percent last week.

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