Gold fell on Tuesday, retreating from the previous session's five-week high, as a dollar rise and encouraging U.S. consumer spending data prompted investors to take profits ahead of a policy decision by the U.S. Federal Reserve.
Bullion prices slipped after a gauge of U.S. consumer spending rose in September, but falling car sales pointed to sluggish economic growth.
The Fed began a two-day policy meeting in which it is widely expected to confirm it will continue buying bonds at the rate of $85 billion a month in a policy statement on Wednesday.
"Investors are keen to see what the Fed will say with regard to the softening seen in some of the recent U.S macro data and whether this will impact the central bank's tapering timeline," said Edward Meir, metals analyst at futures brokerage INTL FCStone.
Many economists say the Fed could push tapering to March next year.
Spot gold was down 0.5 percent to $1,344.89 an ounce by 2:40 p.m. EDT (1840 GMT).
It hit its highest since September 20 at $1,361.60 on Monday, as disappointing U.S. manufacturing and pending home sales data reinforced the view the economy is not yet strong enough for the Fed to start tapering stimulus.
U.S. gold futures for December delivery settled down $6.70 an ounce at $1,345.50, with volume about 15 percent below its 30-day average, preliminary Reuters data showed.
Gold prices have fallen nearly 20 percent this year in the expectation of imminent tapering by the Fed.
The metal has gained 8 percent over the past two weeks, as a budget battle in Washington and a string of weak economic data have raised questions over whether it will scale back monetary stimulus, giving bullion a boost.
ASIAN DEMAND WEAK
Physical demand could take a hit on signs of slower buying by Asian investors and jewelers.
Chinese gold prices closed lower than global prices on Tuesday for the first time this year, traders said, as fears of a credit tightening prompted investors to sell bullion for cash.
As a gauge of investor interest, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, remained unchanged at 872.02 tonnes on Monday after falling 4.5 tonnes on Friday.
Among other precious metals, silver eased 10 cents to $22.46 an ounce. Platinum was down 1.1 percent to $1,454.50 an ounce, while palladium eased 0.1 percent to $742.72.