Gold prices fell on Wednesday as optimism over Sino-US trade talks and hopes of a rate cut from central banks hit demand for bullion ahead of the US Federal Reserve's monetary policy decision later in the day.
Spot gold fell 0.3pc to $1,342.75 per ounce as of 1126 GMT. US gold futures slipped 0.3pc to $1,346.30 per ounce.
"Donald Trump's tweet that he will meet (Chinese President) Xi Jinping has created speculation in the market that there might be some solution on the trade war," said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers. "That has supported global markets and equities have risen."
US President Donald Trump said on Tuesday he had spoken to Chinese President Xi Jinping and that the two leaders' teams would restart trade talks after a long lull in order to prepare for a meeting at the G20 summit later this month.
World stocks held near two-week highs on Wednesday as investors bet on a worldwide wave of central bank stimulus, with expectations building that the United States and the euro zone may deliver interest rate cuts as early as July.
All eyes are now on the Fed which is scheduled to release a statement at 1800 GMT, followed by a press conference by Chairman Jerome Powell.
"Tonight though there won't be a rate cut (by the Fed), there will be ground work for future rate cuts. Markets are focusing on that too," Trivedi said, adding gold was seeing some profit booking ahead of the event.
The Fed is widely expected to stand pat on monetary policy this time, but open the door for an interest rate cut at its next meeting in July.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion, which had soared to a more-than 14-month high of $1,358.04 on Friday.
"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.
Denting the metal's appeal, the dollar index held near a more than two-week high.
Among other precious metals, silver dipped 0.5pc to $14.93 per ounce, while platinum edged slightly lower to $794.88.
Palladium gained 0.7pc to $1,489.80 per ounce, after hitting its highest since March 27 at $1,496.51 earlier in the session.
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