Spot gold was little changed at $2,023.41 per ounce, as of 0232 GMT. U.S. gold futures were down 0.2% at $2,030.10.
The U.S. consumer price index (CPI) data is due on Wednesday.
If the inflation report comes hot and fans worries of another Fed rate hike in June, gold prices could eventually drop to $1,950-$1,920 level, said Ajay Kedia, director at Kedia Commodities in Mumbai.
Bullion is considered an inflation hedge, but higher rates dent the non-yielding asset's appeal.
However, traders are currently pricing in a 92% chance of the U.S. central bank holding rates at their current level in June.
U.S. consumers' inflation expectations were mixed in April, the New York Federal Reserve's report showed.
Besides economic data, market participants are also monitoring developments surrounding the U.S. banking sector and debt ceiling.
Fed survey data released on Monday showed in the latest indication that higher central bank interest rates were starting to bite in the finance sector.
"If there is news of further stress in the banking sector, we will see gold move towards the $2,100 level," Kedia added.
Treasury Secretary Janet Yellen said on Monday that a failure by Congress to raise the $31.4 trillion federal debt limit would cause a huge hit to the U.S. economy and weaken the dollar as the world's reserve currency. [USD/]
Spot silver added 0.2% at $25.61 per ounce.
Platinum rose 0.2% to $1,073.23, while palladium fell 0.3% at $1,548.58.
Although platinum prices might see a short-term correction, overall price risk is to the upside, Heraeus analysts said in a note.
"With automotive demand showing strength, the risk of supply underperformance underpins a tight market throughout this year."
(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Uttaresh Venkateshwaran)
By Ashitha Shivaprasad
