The Fed is expected to begin its long retreat from ultra-easy monetary policy by announcing a small reduction to its $85 billion monthly bond purchases following a two-day policy meeting that ends on Wednesday. Many expect a $10 billion cut.
Spot gold had fallen 1.2% to $1,293.69 an ounce by 0217 GMT, bringing the year's losses to 23%. It had earlier dropped to $1,291.34 - its lowest since August 8.
"It all dependent now on the FOMC," said a precious metals trader in Hong Kong, referring to the Federal Open Market Committee. "It depends on what the language is going to be on their stimulus and what sort of tapering they pursue."
"Gold is still technically under pressure and will probably struggle to go above $1,350 again."
Traders said prices would find their next support level at $1,270-$1,280 an ounce.
Gold, often seen as a hedge against inflation and a slowing economy, benefited when central banks around the world launched stimulus measures to support their economies. The metal hit an all-time high of about $1,920 an ounce in 2011.
But this year several analysts have cut their forecasts for gold prices in anticipation of the US central bank curbing its stimulus measures. Goldman Sachs expects prices to drop to $1,050 by the end of next year.
Physical demand
Due to the volatility in prices, physical demand has failed to pick up rapidly in key consumers India and China. Expectations that prices could fall further once the Fed announces a cut in stimulus have also restrained purchases.
Shanghai gold futures fell 2% on Wednesday.
Top gold consumer India increased its import duty on gold jewellery to 15% from 10%, setting it higher than the duty on raw gold in a move to protect the domestic jewellery industry.
The Indian central bank and finance ministry have taken several steps this year to curb bullion imports in an effort to reduce the country's record trade deficit.
Silver and palladium dropped about 1.6%, while platinum fell nearly 1%.
