Gold prices edged higher in European trading on Wednesday, as investors looked ahead to the outcome of the Federal Reserve's two-day policy meeting, at which it is expected to deliver an interest rate hike.

Comex gold futures were at $1,270.48 a troy ounce by 3:00AM ET (0700GMT), after falling to its lowest since May 26 at $1,260.50 in the prior session. Meanwhile, spot gold was at $1,268.49.

Gold prices notched a fifth-straight decline on Tuesday.

The Fed is widely expected to raise the fed funds target range by a quarter point at the conclusion of its policy meeting at 2:00PM ET (18:00GMT) on Wednesday, which would put it in a range between 1.0%-1.25%.

The U.S. central bank will release its latest forecasts for economic growth and interest rates, known as the "dot-plot".

Fed Chair Janet Yellen is to hold what will be a closely-watched press conference 30 minutes after the release of the Fed's statement, as investors look for fresh hints on the pace of further tightening in the months to come and next year.

Market players will also pay close attention to details of the Fed's plan to reduce its $4.5 trillion balance sheet later this year.

Besides the Fed, the U.S. will publish May inflation figures at 8:30AM ET (12:30GMT) Wednesday. Market analysts expect consumer prices to ease up 0.1%, while core inflation is forecast to increase 0.2%.

On a yearly base, core CPI is projected to climb 1.9%. The Fed usually tries to aim for 2% core inflation or less. Rising inflation would be a catalyst to push the U.S. central bank toward raising interest rates.

At the same time, the U.S. will also publish data on May retail sales, amid expectations for a gain of 0.1% last month, after rising 0.4% in April.

The median Fed policymaker forecast is for two more rate increases by year-end, after already raising its benchmark interest rate once this year, by a quarter percentage point in March.

But a recent run of disappointing U.S. economic data combined with growing uncertainty about the Trump administration's ability to pass tax and healthcare reforms sparked doubts over the Fed's ability to raise rates as much as it would like before the end of the year.

According to Investing.com’s Fed Rate Monitor Tool, conviction for a move beyond Wednesday's widely expected rate hike has faded, with just 40% of market players expecting another rate increase later this year.