Gold advanced to $1,102.00 (+1.52%); however it failed to reach far beyond its 5 year-low as the Fed two-day meeting is scheduled for this week. It will end on Wednesday. The central bank of the U.S. is preparing to raise its interest rates; this would weigh on non-interest-paying bullion. Investors expect the Fed to provide some clues on the timing of a rate hike.

HSBC analyst James Steel believes that gold's recovery from last week's declines appears to be mostly driven by short-covering. "So while we think prices may firm near-term, the sell-off does not look as if it's entirely over as we do not yet detect a notable change in investor sentiment." Last week the metal lost more than 3%.

Data from the International Monetary Fund showed Germany cut its gold holdings by 2.395 tonnes last month, while Russia and Kazakhstan continued to add to their reserves.