The Federal Reserve is widely expected to hike interest rates for only the second time in a decade at a two-day meeting that begins on Tuesday. But bets are now being placed on the timing of rate hikes next year.
"The Fed's statement is much more important on this occasion than the rate hike because its been very widely expected that rates will increase at this meeting," said ICBC Standard Bank analyst Tom Kendall.
"It's unlikely that the Fed would do anything different to what's expected so it is going to be about what the tone of that statement is about growth next year."
Markets were pricing in a nearly 100 percent chance for a quarter percentage point increase to the Fed's target range.
The dollar index, which measures the greenback against major currencies, hovered near 10-month highs as the oil prices soared.
Putting further pressure on gold was the rise in the benchmark 10-year U.S. Treasury yield to a two-year high.
As gold pays no interest, the rise in returns from U.S. bonds is seen as negative for the metal.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.