Spot gold slipped 0.2% to $1,978.60 per ounce by 9:45 a.m. EDT (13:45 GMT) while U.S. gold futures were down 0.1% to $1,988.90.

"This market is treading water in the short term, waiting on its next piece of economic data that could potentially jolt it in one direction or the other," said David Meger, director of metals trading at High Ridge Futures.

Gold dropped below $2,000 last week on Fed officials' hawkish remarks and after surveys showing U.S. and euro zone business activity gathered pace in April.

Markets now see an 88% chance of a 25 basis point Fed hike at its May 2-3 policy meeting, according to the CME FedWatch tool.

Higher interest rates raise the opportunity cost of holding non-yielding gold.

"While it will take a fresh catalyst to see the price return back above $2,000 an ounce, gold is unlikely to fall below $1,950 any time soon," Kinesis Money analyst Rupert Rowling said in a note.

Investors wait for a key Fed-favored inflation gauge, the core PCE (personal consumption expenditures) index, as well as the U.S. GDP quarterly growth rate, due later this week.

"If the U.S. enters a recession later in the year, the Fed is likely to cut rates, reducing U.S. bond yields and dollar strength. This could push the gold price higher above $2,000/oz," Heraeus analysts said in a note.

Platinum shed 3.7% to $1,082.64 an ounce and palladium plunged similarly to $1,543.36.

This was due to profit taking off of recent highs before heading into an uncertain week-and-a-half of news, said Meger.

Silver fell 0.2% to $24.97.