Gold prices drifted lower early Wednesday in New York as investors braced for a monetary policy decision from the Federal Reserve later in the session that could ripple through markets. August gold GCQ8, -0.08% fell $1.20, or 0.1%, to $1,298.20 an ounce, after settling below a psychologically significant level at $1,300 on Tuesday on the back of a strengthening dollar. The ICE U.S. Dollar Index DXY, -0.05% a measure of the dollar against a half-dozen major currencies, was flat on Wednesday but up 0.3% thus far this week. A stronger dollar can weigh on demand for assets priced in the currency, making them more expensive to buyers using other monetary units. A statement from Fed is due at 2 p.m.