"While no rate hike is expected, the market is likely to remain subdued leading into the meeting," analysts at ANZ Research said in a note.
Spot gold was down 0.37 percent to $1,250.24 per ounce. In the previous session, it touched $1,258.79 an ounce, its highest since June 23.
U.S. gold futures for August delivery settled at $1,252.10.
"We remain cautiously constructive on gold as we see no end to dollar weakness for the moment given the ongoing political dramas in Washington and the approaching deadline to extend the debt ceiling," said INTL FCStone analyst Edward Meir.
The dollar was assisted by stronger-than-expected readings on the U.S. economy, but the outlook for the greenback remained clouded by worries that persistent political disorder would
present obstacles to U.S. President Donald Trump's stimulus and tax reform agenda.
"There seems to be very little progress being made on a number of 'pro-growth' Trump initiatives, all being net bullish for gold," Meir added.
The Republican Party's repeated failures to overhaul the healthcare system, multiple congressional and federal investigations into Trump's campaign ties with Russia have cast a shadow over his first six months in office.
Trump's son-in-law, Jared Kushner, on Monday told Senate investigators he had no part in any Kremlin attempt to meddle in the U.S. election despite having met Russians four times last year