Gold prices dipped on Thursday as investors locked in profits, with the focus shifting to Friday's speech by US Federal Reserve Chairman Jerome Powell at the Jackson Hole meeting for clarity on the direction of monetary policy.
Spot gold was down 0.5% at $1,494.09 an ounce by 1212 GMT, while US gold futures slipped 0.8% to $1,503 an ounce.
"The markets are waiting for Jackson Hole. After prices failed to stay above the important $1,500 mark, it's not surprising that investors are taking the chips off the table," Commerzbank analyst Eugen Weinberg said, adding that demand for the metal would remain strong overall.
"Geopolitical tensions, trade uncertainties and above all, developments in financial markets ... will support gold. Interest rates worldwide keep falling and in this environment, gold emerges as a solid investment," Weinberg added.
Minutes of the Fed's July meeting showed policymakers were divided over whether to cut interest rates but united in wanting to signal they were set on more cuts.
The immediate focus shifts to Powell's speech for further clues on interest rate cuts, especially after an inversion in the Treasury yield curve highlighted the risk that the US economy may fall into recession.
Fed funds futures are fully pricing a quarter-point cut in rates next month and more than 100 basis points of easing by the end of next year.
Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.
FISCAL STIMULUS
Traders are also looking to the Group of Seven summit this weekend for clues on what additional steps policymakers may take to boost economic growth.
Meanwhile, hopes for further US fiscal stimulus took a knock when President Donald Trump reversed course and said he was not looking at cutting payroll taxes.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.8% to 851.91 tonnes on Wednesday.
Palladium eased 0.2% to $1,468.21 an ounce after nearing $1,500 mark in the previous session.
"We expect palladium to climb to $1,530 in the near term. Although slower global growth and risk aversion act as headwinds, palladium remains supported by fundamentals," UBS analysts said in a note.
"Rising palladium loadings as emissions regulations tighten offset weakness in global car sales, suggesting continued growth in demand. Given constrained supplies, this implies that market deficits are likely to persist."
Palladium outshone gold for the first time in 16 years towards the end of 2018, but gold regained its edge over the autocatalyst metal on Aug. 1, driven by an escalation in the trade war and heightened fears over a global downturn.
Silver fell 0.5% to $17.03 per ounce, while platinum edged 0.2% higher to $854.54.