Wednesday is also the second day of the U.S. Federal Reserve's two-day meeting. A decision to raise rates will boost the U.S. currency, which when it rises makes dollar-priced commodities more expensive for non-U.S. firms.
"A rate rise from the Fed is pretty much priced in, we're probably going to see two more hikes this year," said Oxford Economics analyst Daniel Smith. "A period of higher rates will tend to mean pressure on gold prices."
The statement from the Fed due to be released at 2 p.m. ET and a briefing at 2:30 p.m. will be scrutinized for any changes in thinking among policymakers.
"A Fed hike on Wednesday is fully discounted by the market...the only thing that might prompt a surge in the dollar and rates is if the FOMC members lift the number of rate hikes they expect this year," ICBC Standard Bank said in a note. "Last time they went up from two hikes in 2017 to three. A rise to four is possible; we certainly think that the Fed will lift rates four times this year."
Traders said gold would have to close above $1,209, the 55-day moving average, to make further headway on the upside. Downside support remains at the psychological level of $1,200 an ounce.
Recent selling by investors can be seen in the holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which fell 1.06 percent to 825.22 tons on Friday.
Hedge funds and money managers also slashed their net long positions in COMEX gold from the highest in three months in the week to March 7, U.S. Commodity Futures Trading Commission data showed on Friday.
Silver fell 0.26 percent to $16.98 an ounce on Monday, platinum slumped 0.21 percent to $940 an ounce and palladium added 0.99 percent to $751.10 an ounce.