Gold prices inched lower on Tuesday as investors avoided taking big positions ahead of key US non-farm payroll data due later this week, an important parameter to determine the US Federal Reserve's future policy stance.

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Spot gold fell 0.1 percent to USD 1,810.96 per ounce by 0348 GMT, while US gold futures dropped 0.5 percent to USD 1,813.40.

"Every data point we get from here until the Jackson Hole symposium will be crucial," said Kyle Rhoda, an analyst at IG Market.

"There's a lot of spare capacity in the labour market... If there's the sense that the Fed will continue to keep policy settings accommodative medium to longer-term, that's a really good dynamic for gold prices, especially if we see inflation expectations remain relatively elevated."

Large stimulus measures tend to support gold, which is often considered a hedge against inflation and currency debasement.

Fed Chairman Jerome Powell's remarks last week about interest rate hikes being "ways away" and the job market propelled gold to a two-week peak.

Fed Governor Christopher Waller on Monday said the central bank could start to reduce its support by October if the next two monthly jobs report each show employment rising by 800,000 to 1 million, as he expects.

"In less than a week, gold has gone from a potential breakout and breakdown candidate on the charts to a buy the dips, sell the rallies market," Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.

"Gold futures are practically moving along a flat 200-day EMA which is further indicative of a consolidating market."

Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund fell 0.2 percent to 1,029.71 tonne on Monday.

Silver fell 0.5 percent to USD 25.30 per ounce, palladium rose 0.1 percent to USD 2,678.89, while platinum was down 0.5 percent at USD 1,051.65.