Gold inched lower in quiet trading on Tuesday as participants largely stayed on the sidelines ahead of a Federal Reserve policy statement on Wednesday that may provide clues on the pace at which it plans to scale back its bond-buying program.
Bullion pared earlier losses on signs the U.S. economy may be slowing as data showed home prices in May rose less than expected and consumer confidence waned in July.
The Fed is scheduled to release a policy statement Wednesday afternoon after its two-day meeting. Traders will be looking for clues as to when the U.S. central bank will start tapering its $85 billion monthly bond purchases.
Gold plunged 5 percent after the Fed's June meeting when it gave its most explicit signal yet that it plans to wind down the era of easy money. However, Fed chief Ben Bernanke's subsequent remarks about the need to keep a stimulative policy in place given low inflation and an uncertain market triggered a gold rally.
"If Bernanke comes out and specifically indicates that there is underlying weakness in the jobs market, then I think gold is going to go much higher," said Jeffrey Sica, chief investment officer at Sica Wealth, which manages over $1 billion in client assets.
(Read more: Gold bugs: Time for 'ugly duckling' to shine?)