Platinum group metals held up, with spot palladium hitting repeated 16-month highs, buoyed by signs of a brighter global economic outlook that is expected to boost demand for industrial metals.

Spot gold inched down 0.1 percent to $1,656.40 an ounce by 1310 GMT, after dropping 1.5 percent last week, its sharpest weekly loss in a month. It fell earlier to a two-week low of $1,653.04.

US gold futures for February delivery were down 0.6 percent to $1,656.10.

"The market is on hold ahead of the US Federal Reserve's meeting, and expects comments on further quantitative easing measures," MKS Finance's head of marketing Frederic Panizzutti said.

"Today's trade (is) pretty quiet, with gold players watching euro-dollar movements, looking for any indication of what is going to happen in the next few days," he added.

The Federal Open Market Committee (FOMC) policy statement on Wednesday is likely to provide the next short-term direction for gold. Accommodative policy is seen as positive for the metal, as rampant cash printing would prompt currency debasement.

US non-farm payrolls data on Friday will also be examined for more clues on the state of the world's largest economy.

On the wider markets, the euro held below an 11-month high against the dollar after ECB data showed that loans to companies and households in the euro zone contracted for the eighth month running in December, showing low official borrowing costs are having little success in reviving investment and spending.