By MATT WHITTAKER

NEW YORK—Gold futures moved sharply higher Tuesday as participants buy back previously sold contracts to square up positions ahead of the Federal Reserve's interest rate announcement after the market closes.

In recent trading, April gold was up $20.30 at $1,125.70 an ounce on the Comex division of the New York Mercantile Exchange. It reached as high as $1,127.

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"Folks want to square up in front of the Fed," said Sterling Smith, an analyst with Country Hedging.

Most don't expect the Fed—in a 2:15 p.m. EDT rate decision and accompanying statement from the Federal Open Market Committee—to raise very low interest rates. But all eyes will watch for any changes in the language on the economy accompanying the statement.

Through Monday, Comex April gold had pulled back some 3% from its highest close this month. That leaves room for the repurchasing of previously sold positions.

Such buying is coming against a background of support from a weaker U.S. dollar. A lower greenback often boosts dollar-denominated gold by making the metal less expensive for purchasers using other currencies, helping demand.

"With the dollar down, that's definitely helping the case for gold," said Dan Cook, an analyst with IG Markets.

As the gold market moved higher Tuesday, its rising price touched off some pre-placed buy orders, fueling more buying, said Stephen Platt, an analyst with Archer Financial Services.

The metal has pushed past technical resistance around $1,120