Investors are closely watching the outcome of a two-day Federal Reserve meeting which ends on Wednesday for any signs that interest rates will stay lower for longer, as that could put some pressure on the US dollar. Gold fell $1.26 to $1,675.54 an ounce by 0640 GMT, having risen to $1,681.16 on Monday, its strongest since Dec. 12, on technical buying. Gold struck a record around $1,920 last September. "Gold needs to break and hold above the $1,683-$1,685 mark in the next few sessions to cross the $1,705-$1,720 mark; else we are possibly heading first to $1,631," said Pradeep Unni, senior analyst at Richcomm Global Services. "Recent price stability and mushrooming demand from the Middle East and India is helping the physical markets. However, the market is unlikely to sustain the recent gains given the ongoing uncertainty in the euro-zone with respect to Greece." The euro retreated from a three-week peak against the dollar on Tuesday after talks to reduce Greece's debt burden suffered a setback, keeping alive fears of a default. Euro zone finance ministers on Monday rejected as insufficient an offer made by private bondholders to help restructure Greece's debts, sending negotiators back to the drawing board and raising the threat of Greek default. The most active gold contract on the Tokyo Commodity Exchange, December, rose as high as 4,167 yen a gram, its biggest gain since mid-December. The gains initially lifted cash gold despite slow trading during the Lunar New Year break. US gold lost $1.2 at $1,677.1 an ounce. Some investors are waiting for the outcome of the US Federal Reserve policy meeting, which starts later on Tuesday. While no policy change is expected, the Fed will likely show that its policymakers expect to start hiking interest rates again only in the first half of 2014, more than five years after chopping them to near zero, a Reuters poll of leading Wall Street economists showed. Any signs of further easing initiatives in the United States could provide support for gold prices, said Natalie Robertson, an analyst at ANZ. "That's something to look forward to. We have been seeing some buying from India, actually quite firm buying from India in the last few days because of the wedding season there." The wedding season in top consumer India started last week and lasts through April, pausing for a few weeks deemed inauspicious for nuptials. Gold jewellery is a popular gift at marriages and festivals in India. "Despite India's import duties increasing as well as prices trending a little bit higher in the last few days, we are still seeing some firm orders from India," said Robertson. Central bank gold purchases are expected to have hit another record in 2011, while demand for gold-backed exchange-traded products fell to less than half of that seen in 2010 last year, according to a report from the World Gold Council on Monday. In other markets, the Nikkei rose to its highest closing level in nearly three months on Tuesday on hopes that a Greek debt deal will still be reached, while Brent crude held above $110 on concerns over supply. Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust, slipped about 0.41 percent on Monday from Friday, while that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged in the same period.