Updated from 12:56 p.m. EDT

Gold and metals reversed early gains to finish lower Wednesday in cautious trading on the first day of the

Federal Reserve

meeting on interest rates

Gold for August delivery lost $3.40, or 0.6%, to close at $581 an ounce, after earlier rising to an intraday high of $589.5.

Among other metals, silver for July delivery dropped 4 cents, or 0.4%, to $10.15 an ounce while copper for July delivery stayed afloat, gaining 10.1 cents, or 3.3%, to $3.18 a pound.

Gold, which acts as a hedge against inflation, had received an early bid as crude oil moved above $72 a barrel. In recent action, crude oil for August delivery was trading up 33 cents at $72.25, after a government report showed a larger-than-expected drop in inventories.

But commodities and other markets remained under pressure as attention turned to the Fed, whose two-year-old rate-tightening campaign finally caught up with the metals markets last month. Commodity bulls worry that more rate hikes will sap demand for raw materials and continue pressuring prices.

Some metals analysts, however, believe the Fed's decision, expected Thursday afternoon, might already be factored in the market.

"The

Fed meeting later today has been exhausted as a subject of worry for all markets and only a half-point surprise may make any difference at this point," writes Jon Nadler, investment-products analyst at bullion dealer Kitco.

Still, the dollar was advancing ahead of Thursday's decision, also pressuring gold and metals. A stronger dollar pressures dollar-denominated commodities, such as gold, as it takes less of the currency to buy the same amount of gold.

The Dollar Index, which tracks the greenback against a basket of key currencies, was recently up 0.4%, as the market prepared itself for a hawkish statement from the Fed.

Gold bugs hope that the dollar will resume a multi-year decline once the Fed stops lifting interest rates, boosting the need for safe assets, such as gold.

These hopes were again expressed by participants at the London Bullion Markets Association's annual meeting in Montreux, Switzerland, according to Nadler.

"Many conference participants foresee the $700 level in gold as being regained before the end of 2007," he writes. "The majority of delegates pinned their hopes for bullion on the expectation that the US dollar's structural woes would inevitably weaken it further within the year and a half timeframe."

Nadler, meanwhile, remains weary of the prospects for gold if only big investment funds return to the market and not the physical buyers, who normally make up for most of the demand.

Meanwhile, shares of metals miners were trading lower in recent action, tracking overall weakness on Wall Street. The Philadelphia Gold and Silver index was down 0.3%, the Amex Gold Bugs index was losing 0.6% and the CBOE Gold index was down 0.4%.

BHP Billiton

(BHP) - Get Report

was among those bucking the trend, recently rising 0.3% after making bullish comments at its Carbon Steel Materials briefing in Sydney. The Australian mining giant expects global steel consumption to increase 7% in 2007.

Jason Fairclough, a Merrill Lynch research analyst in Sydney, issued a positive note on the stock after the briefing, saying that BHP offers a diversified defensive play in a metals-mining sector which he expects to remain volatile over the next few months.

He also noted that BHP is concerned about the impact of rising project development costs. "This is an industry-wide problem that could see the supply side continue to lag demand going forward and therefore underpin commodity prices," he wrote.

The newly launched

Market Vectors-Gold Miners

(GDX) - Get Report

exchange-traded fund, which tracks the performance of the

Amex Gold Miners Index

, was down 0.5%.

ETFs tracking the metals themselves were mixed. The

iShares Silver Trust

(SLV) - Get Report

was up 0.4%, and the

StreetTRACKS Gold Trust

(GLD) - Get Report

was down 0.03%.