(REUTERS) -- Gold held near $1,675 an ounce on Tuesday as investors took to the sidelines ahead of the release of minutes from the Federal Reserve's latest policy meeting, which will be closely watched for clues on the direction of monetary policy.
Ultra-loose monetary policy helped send gold to record highs in 2011. But a recent raft of firmer-than-expected U.S. economic data has curbed expectations for a fresh round of quantitative easing, which has put the brakes on gold's climb.
Spot gold was down 0.1 percent at $1,676.06 an ounce at 1322 GMT, while U.S. gold futures for April delivery were down $1.70 an ounce at $1,678.00.
The minutes of the Fed's March meeting due later are expected to offer further insight on how actively the central bank is considering additional steps to boost growth. Fed policymakers on Monday signaled little appetite for further monetary steps to stimulate U.S. growth in an economy that is gradually strengthening.
The gold market has recently been very sensitive to Fed statements, so it is likely to react to the news, BNP Paribas analyst Anne-Laure Tremblay said. The apparent absence of physical demand, notably with the strike of Indian jewelers, has been weighing on prices.
Gold demand from India, the world's biggest buyer of bullion, remained sluggish as the prolonged strike by jewelers to protest against excise taxes levied in the budget continued into a third consecutive week.
Prices have fallen around 6 percent since expectations that the Fed would launch another round of asset-buying pushed gold to $1,790 at the end of February, its highest since November.
We consider the drop in the gold price to be a buying opportunity as we expect the U.S. economy to surprise on the downside over coming months, which should result in the implementation of (a third round of quantitative easing), Societe Generale analyst Robin Bhar said in a note late on Monday.
We adhere to our medium-term bullish stance. The markets remain concerned about the possibility of further quantitative easing/liquidity increases in Europe and the U.S., allied to negative real interest rates worldwide, he added.
RISK APPETITE WANES
Appetite for assets seen as higher risk, like stocks and hard commodities, proved fragile on Tuesday. European shares fell after recording their largest one-day rise in three weeks, while oil prices retreated.
Safe-haven German government bonds reversed early losses to firm a touch, after hopes for stronger global growth gave way to concerns about euro zone's ability to keep budget deficits under control.
The dollar dollar firmed after falling to a one-month low against a basket of currencies earlier on Tuesday. A weaker dollar tends to support gold, which is priced in the U.S. currency.
It's really a weakening dollar (supporting gold), because conditions are better in terms of global growth conditions, global economic conditions, Deutsche Bank analyst Daniel Brebner said. In that environment, what's the real reason for buying gold?
Brebner said he was bullish on gold in the long term and predicted an average price of $1,800 an ounce this year but said prices were likely to be flat or go down in the near term.
Traders will also be watching U.S. factory orders due at 1400 GMT as well as a key U.S. employment market report due later in the week for fresh clues on the health of the world's biggest economy.
Among other precious metals, spot silver was f latat $32.92 an ounce, spot platinum was up 0.9 percent at $1,656.99 an ounce, and spot palladium was up 1.2 percent at $657.47 an ounce.