LONDON (REUTERS) - Gold edged lower on Tuesday as the US dollar recovered, retreating from a five-week high as investors started to factor in expectations that the United States Federal Reserve will maintain its stimulus measures well into early next year.

The Fed begins a two-day policy meeting on Tuesday in which it is widely expected to confirm it will continue buying bonds at the rate of US$85 billion (S$105 billion) a month. Many economists believe the Fed could push tapering to early next year.

Spot gold was down 0.5 per cent to US$1,344.64 an ounce by 1104 GMT (7.04pm Singapore time). It hit its highest since Sept 20 at US$1,361.60 in the previous session, supported by weaker than expected US data reinforcing the view that the US economy is not yet strong enough for the Fed to start tapering monetary stimulus. US gold futures for December delivery were down by US$7.30 an ounce at US$1,345.10.

"We had decent gains yesterday and a bit of profit-taking was to be expected," VTB Capital analyst Andrey Kryuchenkov said. "The main focus remains on the Fed and the market seems to have factored in the central bank will not change its current accommodative stance."

Gold prices have fallen nearly 20 per cent this year in the expectation of imminent tapering by the Fed, but a budget battle in Washington and a string of weak economic data have raised questions over whether it will scale back monetary stimulus, giving bullion a boost. The metal has gained 8 per cent over the past two weeks.

"The market will continue to be sensitive to any US data and bullion's trade will continue to be strongly correlated to the dollar index," Mr Kryuchenkov said.