Gold fell on Wednesday as investors booked profits on the metal's rally earlier in the day ahead of the outcome of a Federal Reserve policy meeting that many hope will confirm the central bank's strategy to kick-start U.S. growth.
The Federal Open Market Committee (FOMC) is widely expected to signal it will rebalance its portfolio of Treasury holdings in favour of longer-dated debt, which should help it anchor longer-dated interest rates, rather than embark on a another multi-billion round of government bond buying, or quantitative easing.
Gold has been a major beneficiary of the Fed's QE programmes, having gained more than 40 percent since the central bank's most recent round of bond buying, which ran from November 2010 to June this year.
While few in the market expect QE3, any measures that keep U.S. rates low in the face of a struggling economy should support gold in the longer run, although with market volatility running high, the bullion price will still be prone to such swings.
Spot gold was last down 0.6 percent on the day at $1,792.80 an ounce by 1355 GMT, after having risen earlier in the session by as much as 0.7 percent to $1,816.26.
So far this month, gold is down by 0.7 percent and set for its first monthly fall since June.
On a quarterly basis, it is set for its strongest gain since 1986 as consumers and investors alike remain undeterred by near-record highs.
Once the Fed is out of the way, market players should focus more again on the euro zone debt crisis and whether or not Greece will default ... this should be very supportive again of gold and, besides, the latest demand data all point to very robust demand, that is sustainable demand, even at the current high prices, said Commerzbank analyst Daniel Briesemann.
Highlighting the bullishness, an annual survey of gold investors and analysts at the world's largest bullion traders event showed participants believe the price will rise beyond $2,000 an ounce in the next year, although it will not match the record-breaking 50 percent surge of the last 12 months.
With no let-up seen in the financial markets uncertainty that fanned the safe-haven investment spree, bullion is expected to rise to $2,019 an ounce by November 2012, according to an anonymous survey of delegates at the conclusion of the London Bullion Market Association's (LBMA) annual conference on Tuesday. That is about 12 percent above current levels.
In the latest sign that U.S. growth has stalled, new construction of U.S. homes fell more than expected in August, keeping pressure on President Barack Obama to do more to help the economy.
Gold is back in a holding pattern and awaiting the outcome of the Federal Reserve policy meeting, said Ross Norman, director of Sharps Pixley.
The gold market will be scrutinizing reports for any signs of further monetary easing which would give the green light for the market to move higher again and possibly back towards record highs at $1,920.
Silver rose by 1.0 percent to $40.06 an ounce, mimicking the steady tone of the gold market.
In fundamental news for silver, imports into key consumer China rose to two-month highs in August, but at 314,706 kg, they were down by a third year on year and below both the monthly average of 316,865 kg for this year and the 2010 monthly average of 436,777 kg.
The Chinese data also showed a 9 percent yearly rise in imports of palladium to five-month highs. The metal is used primarily in catalytic converters in gasoline-powered vehicles and China, home to the world's largest car market, is a key source of demand.
Spot palladium was last up 0.1 percent on the day at $712.72 an ounce, while platinum pared earlier gains to trade flat at $1,770.24 an ounce.