Spot gold fell 0.3% to $1,748.13 per ounce by 0500 GMT, having earlier touched its lowest level since Aug. 12 at $1,741.86.
U.S. gold futures fell 0.2% to $1,748.60.
The dollar index hit a near one-month high, hurting gold's appeal for holders of other currencies. [USD/]
The market is starting to think that a taper announcement could be imminent and that there could be a hawkish surprise in the dot plots, Stephen Innes, managing partner at SPI Asset Management, said.
Bullion is seen as a hedge against the inflation and currency debasement likely from the widespread stimulus. The Fed's tapering could tackle both those conditions, diminishing gold's appeal.
"It really looks like the markets turned quite bearish on gold, with some critical support levels ($1,780 and $1,750) giving away and this does open up for a test of $1,700," Innes said.
The Fed is expected to open the door to reducing its monthly bond purchases when it meets on Sept. 21-22, while tying any actual change to U.S. job growth in September and beyond.
Higher interest rates raise the opportunity cost of holding non-interest bearing gold.
"Gold's price action is ominous, especially as dollar strength persists and US yields continue firming," Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA, said in a note.
The precious metal is likely to test the $1,720 level with longer-term support around $1,675, Halley said.
Elsewhere, silver fell 0.8% to $22.22 an once, after earlier hitting its lowest level since November last year.
Platinum slumped to a ten-month trough of $907.50 and was last down 2.5% at $917.58.
Palladium slipped 3.2% to $1,952.69.
(Reporting by Eileen Soreng and Nakul Iyer in Bengaluru; Editing by Devika Syamnath and Arun Koyyur)
By Eileen Soreng