Gold ticked lower on Wednesday on lack of physical buying and as investors waited to see if the U.S. Federal Reserve sticks to its stimulus programme to spur the economy, which could boost the metal's appeal as a hedge against inflation.
The Fed's policy-making committee ends its meeting later in the day with a statement that could be dovish in response to recent weak economic data. Investors also await Friday's non-farm payrolls data, which will signal the longer-term prospects for the Fed's monetary stimulus.
Fears that central banks' money-printing to buy assets will stoke inflation have been a key driver in boosting gold, which rallied to an 11-month high last October, after the Fed announced its third round of aggressive economic stimulus.
Gold fell $2.24 an ounce to $1,474.36 by 0331 GMT, with the market torn between hopes that the Fed will keep its current policy and daily outflows from exchange-traded funds, as investors cut their exposure.
"Accommodative policies are generally seen as supportive for gold, but as the events of the last few weeks have demonstrated, the precious metal does not always move in lockstep with simple expansion in money supply," said Edward Meir, a metals analyst at futures brokerage INTL FCStone.
"Instead, it seems to pick up steam either as a result of turmoil in the financial markets or on the back of higher inflation readings, neither of which seem to be prevalent at this particular time."
U.S. gold futures for June delivery stood at $1,474.00 an ounce, up $1.90.
Cash gold and U.S. futures tumbled to around $1,321 on April 16, their lowest in more than two years, after a drop below $1,500 sparked a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.19 percent to 1078.54 tonnes on Tuesday, their lowest since September 2009.
But gold has recovered more than half of its $225 loss incurred between April 12 and 16, boosted by strong physical demand, especially in top bullion consumers China and India.
"With investment flows negative but monetary policy supportive, we think a neutral fundamental rating is the most appropriate one. In contrast to neutral fundamentals, technical indicators are clearly negative," said Credit Suisse in a report.
"The longer-term trend has been broken to the downside. This fact is significant because in a downtrend the default move of a price is lower in the absence of convincing fundamentals. With fundamentals only neutral, we think some risk still persists."
Overall trading was quiet, with most markets in Asia shut for a holiday, although Japan was open. Tokyo gold futures, which often dictate movements in cash gold and U.S. futures, ticked higher on Wednesday, shrugging off disappointing Chinese manufacturing data.
Premiums for gold bars were little changed in Tokyo at up to $1 to the spot London prices, levels last seen in July 2012 before they were revisited two weeks ago, following a surge in physical buying.
Hong Kong and Singapore were closed for a holiday. A rush in buying of gold bars after the recent plunge in prices has led to tight physical supply in Asia.
"We have a similar tight situation in Japan, because there has been a lot of buying from China and other regions in Asia," said a dealer in Tokyo. "But at this moment, buying interest from the Japanese is not so huge," said the dealer, adding that domestic retail investors had paused for breath after recent purchases.
In other markets, the dollar eased on Wednesday as investors warily awaited the outcome of the Fed's two-day policy meeting, while the euro drifted on expectations for a rate cut when the European Central Bank meets later in the week.