Gold prices edged lower on Wednesday as investors awaited the US Federal Reserve's statement later in the session for cues on its interest rate outlook, while hopes the bitter US-China trade dispute could soon see some thawing raised risk appetite.
Spot gold dipped 0.1% to $1,344.25 per ounce as of 10:38 a.m. EDT (1438 GMT). US gold futures fell 0.2% to $1,347.80 per ounce.
"The market might become a little cautious just ahead of the meeting and gold investors might take a neutral position then," said Suki Cooper, precious metals analyst at Standard Chartered Bank.
The Fed monetary policy statement scheduled for release at 2 p.m. EDT (1800 GMT) will be followed by a news conference by Chairman Jerome Powell. Futures markets have almost fully priced in a quarter-point easing in July and imply more than 60 basis points of cuts by Christmas.
"People are optimistic about Fed cutting rates twice, once in July and once in December," Cooper said.
Gold touched a 14-month peak of $1,358.04 an ounce on Friday, and has gained more than 6% since touching a 2019 low of $1,265.85 in early May.
"A major driver of the gold price rally since 4Q18 has been the Fed's pivot from expecting rate hikes to expecting cuts. ... We expect market participants to be disappointed by the Fed's press conference on Wednesday. This would pressure gold prices," Societe Generale said in a note.
The US central bank is not alone in contemplating rate cuts. European Central Bank President Mario Draghi hinted on Tuesday that if inflation failed to pick up, more policy easing could be on its way.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Also weighing on prices was fresh optimism on the US-China trade war front. China said earlier in the session that positive outcomes were possible in trade negotiations with Washington, after the presidents of the world's two largest economies agreed to revive their troubled talks at a G20 meeting later this month.
The drawn-out trade tussle between the world's two biggest economies has toppled global markets since its inception and raised concerns of an economic recession.
"We think the recent rally in gold rally has been as a result of combination of two things, the trade issues and central banks cutting rates. I don't think these two have factored in completely yet," Cooper added.
Amongst other precious metals, silver was down 0.5% to $14.93, while platinum was unchanged at $799.38. Palladium gained 1.3% to $1,498.95, having hit its highest since March 27 at $1,501.69 earlier in the session.
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