Gold held below a five-week high on Tuesday as the dollar edged up and investors started to factor in expectations the U.S. Federal Reserve will maintain monetary stimulus.

The Fed begins a two-day policy meeting on Tuesday in which it is widely expected to confirm it will continue buying bonds at the rate of $85 billion a month.

Many economists say the Fed could push tapering to March next year.

Spot gold was down 0.1 percent to $1,350.86 an ounce by 1436 GMT. It hit its highest since Sept. 20 at $1,361.60 in the previous session, supported by weaker-than-expected U.S. data that reinforced the view the economy is not yet strong enough for the Fed to start tapering stimulus.

U.S. gold futures for December delivery fell by $1.10 an ounce to $1,350.71.

"We are treading water... waiting for the FOMC meeting and what Bernanke says tomorrow night about a timetable for tapering," Societe Generale analyst Robin Bhar said.

The dollar gained 0.2 percent against a basket of currencies after data suggested U.S domestic consumer spending grew modestly in September after factoring out a hefty drop in car sales.

The currency also drew some support from a stabilisation in U.S. Treasury yields above 2.5 percent.

Returns from U.S. bonds are closely watched by the gold market because the metal pays no interest.

Gold prices have fallen nearly 20 percent this year in the expectation of imminent tapering by the Fed, but a budget battle in Washington and a string of weak economic data have raised questions over whether it will scale back monetary stimulus, giving bullion a boost.

The metal has gained 8 percent over the past two weeks.

"The market will continue to be sensitive to any U.S. data, and bullion's trade will continue to be strongly correlated to the dollar index," VTB Capital analyst Andrey Kryuchenkov said.

PHYSICAL DEMAND

Though a prolonged period of easy money could support gold, physical demand could take a hit because of the higher prices. Demand in Asia has been subdued for a while.

"We continue to view gold as precariously placed, while physical demand for the metal remains soft," ANZ analysts said in a note. "We viewed the metal as overbought above $1,340 on the back of weak demand from China and continued ETF selling."

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, remained unchanged at 872.02 tonnes on Monday after falling 4.5 tonnes on Friday.

Spot silver rose 0.5 percent to $22.58 an ounce.

Spot platinum was down 0.3 percent at $1,466.24 an ounce, having risen to a five-week high of $1,469.50 in the previous session on prospects that strikes in South Africa could curb supply.

Spot palladium was unchanged at $742.47 an ounce.