Gold prices drifted weaker in early Asia on Tuesday with attention on the Federal Reserve and demand prospects for the precious metal as it moves to normalize monetary policy.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange were last quoted at $1,267.84 a troy ounce.
Overnight, gold prices were mostly unchanged on Monday, as investors awaited an upcoming Federal Reserve (Fed) interest rate decision and press conference from Fed Chair Janet Yellen to gauge whether the Federal Reserve will continue on its monetary tightening path.
The Federal Open Market Committee (FOMC) is expected to hike its benchmark rate from 0.75-1% to 1-1.25%, after the conclusion of a two-day meeting on Wednesday.
Investors, however, are keen to hear from Fed Chair Janet Yellen, who is slated to give a press conference after the interest rate decision.
Investors will pay close attention to the press conference for any clues on the Fed's plan to reduce its $4.5-trillion balance sheet later this year and any possible shift in tone on future interest rate increases in the wake of weak U.S. economic data.
The U.S. economy created far fewer jobs than expected in the month of May while a slump in energy prices is expected to weigh on the pace of inflation.
Gold is sensitive to moves higher in U.S. interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion.
Despite investor expectations of an interest rate hike, demand for gold has remained robust in recent months, as data showed that state investors increased their net gold holdings to record levels in an effort to hedge against a potential weaker dollar.
Data from the Official Monetary and Financial Forum showed that state investors increased their gold net holdings by 377 tonnes to an estimated 31,000 last year - the highest level since 1999.