Gold fell on Tuesday for a second straight session as muted physical demand weighed on prices, alongside fears of any cut in the U.S. Federal Reserve's $85 billion monthly bond purchases.
Investors are closely watching the Fed's two-day policy meet that begins later on Tuesday as a string of healthy U.S. data has increased speculation the bank could scale back its bond buys, hurting gold's appeal as a hedge against inflation.
Physical demand is falling off in India and China, the top two consumers of bullion, from peak levels seen after the historical sell-off in April.
"There is not much buying interest. The sentiment right now is low," said a trader in Hong Kong.
Spot gold fell $1.40 to $1,382.95 an ounce by 0403 GMT after losing about 0.4 percent on Monday as U.S. stocks rallied ahead of the Fed meeting.
Shanghai gold futures fell 0.5 percent.
Any signs of a significant slowdown in the Chinese market would be a big blow to bullion prices as investors expect China to offset slower buying from India.
Another trader in Hong Kong said premiums there have fallen to $2 an ounce over London spot prices, from a high of $6 seen last month. Hong Kong sells mainly to buyers in China.
Demand in India has eased since the government hiked its import duty on bullion by a third in an effort to reduce its current account deficit.
The country's gold imports fell from an average of $135 million in the first half of May to $36 million in the second half, Indian finance minister said earlier this week.
Recent strong U.S. housing and labour data has raised the possibility of the Fed slowing its bond purchases sooner than expected.
Most economists expect the Fed to scale back the size of its bond purchases by the end of the year, and a sizeable number expect reduced buying as early as September, according to a Reuters poll.
Bullion is down more than 17 percent so far this year as investors have shunned its safe-haven appeal.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood at 1,003.17 tonnes on Monday -- their lowest in more than four years.