Gold rose nearly one percent on Tuesday after disappointing U.S. data hit the dollar and dampened expectations that the Federal Reserve will hint at this week's policy meeting at an interest rate hike in coming months.
Spot gold climbed to a three-week high of $1,212.80 percent after the data showed U.S. consumer confidence dropped in April to its lowest level since December.
It was up 0.8 percent at $1,210.88 an ounce, after a 2 percent rise on Monday, while U.S. gold futures for June delivery rose $7.30 an ounce to $1,210.50.
"Market participants are focusing on the Fed meeting on hopes of some hints on when the Fed will raise interest rates ... However, i don't think we will get any surprising news tomorrow," Commerzbank analyst Daniel Briesemann said.
"Traders will continue to look at the data, which has been quite weak lately."
The dollar fell 0.5 percent against a basket of leading currencies.
Recent sluggish economic data from the United States led the market to expect the Fed will probably not act until later in the year.
The Fed's two-day meeting kicks off on Tuesday, with a statement scheduled for release on Wednesday.
Interest rates at rock-bottom levels have benefited gold since the 2008-2009 financial crisis as the metal does not bear any interest. Conversely, a rate hike could dent demand for bullion as investors' appetite for non-yielding assets diminish.
Traders were also monitoring debt talks in Greece after Prime Minister Alexis Tsipras reshuffled his team handling talks with European and IMF lenders, a move seen as a step closer to securing fresh funding.
Options-related buying also buoyed prices on Monday as U.S. May options expired at the end of the day with relatively heavy open interest at the $1,200 strike price, traders said.
In the physical markets, demand eased on Tuesday as the price neared the key $1,200 level.
China's gold imports from Hong Kong dipped to their lowest level in seven months in March, data showed on Tuesday.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.44 percent to 739.07 tonnes on Monday, the first decline in two weeks.
Among other precious metals, silver rose 1 percent at $16.54 an ounce, after a 4.3 percent gain in the previous session, boosted by gold's advance.