Silver steadied on Wednesday, after its largest one-day slide in over a month the previous day, while gold profited from a weaker dollar which came under pressure ahead of a US Federal Reserve interest rate decision.

The Fed is not expected to signal any rush to scale back its multi-billion dollar support mechanisms for the economy, so investors are waiting to hear more on the outlook for monetary policy from chairman Ben Bernanke when he gives the central bank's first post-decision news conference later in the day.

With the dollar under pressure and its inverse link to gold strengthening for the first time in a week, the bullion price was set for a second day of gains, although a string of public holidays in the United Kingdom restricted volumes.

Spot gold was last up 0.4 per cent at $1,506.90 an ounce by 0940 GMT, about 0.8 per cent below Monday's record high at $1,518.10. US futures for June delivery were last up 0.3 per cent at $1,507.30.

'It's consolidation. Gold has done a bit better than silver over the last couple of days, but we're still in a holiday period here in London so trading volumes are not as high as normal and I don't think there will be a huge move (ahead of the Fed,' said Mitsubishi analyst Matthew Turner.

'I don't think there's much outlook until after the press conference,' he said.

Silver steadied somewhat, following its largest one-day fall in a month the previous day. The price is on track for a 21 per cent gain this month and a 47-per cent rise this year, making it the top performing precious metal.

Dealers in Asia said strong physical demand was offering some support to silver, although holdings of silver in the world's largest exchange-traded funds staged their largest one-day outflow in nearly two weeks by April 26.

Spot silver was last flat at $45.48 an ounce, having recovered from a 3-per cent drop on Tuesday, its largest one-day slide in six weeks. US silver was last up 1 per cent at $45.52.

Implied volatility in silver options has been at its highest this week since November last year as the spot price has swung from lows around $43 to highs above $49 in the space of a week.

'The recent sharp increase in volatility is an indication of the increasing nervousness of market players and could be a sign that the rally in the silver price is approaching an end,' said Commerzbank in a note.

In fundamental news for silver, MMTC, India's largest bullion importer, plans to double its silver purchases this fiscal year to 1,500 tonnes, to catch up with exploding investment interest.-Reuters