LONDON: Gold prices fell on Wednesday after Russian President Vladimir Putin said he was ready to discuss a way out of the Ukraine crisis, and ahead of congressional testimony from Federal Reserve Chair Janet Yellen.
Spot gold was down 0.4 percent at $1,301.94 an ounce by 1312 GMT, while U.S. gold futures for June delivery fell by $5.90 an ounce to $1,302.70.
Concerns that a stand-off between pro-Russian separatists and government troops in Ukraine could escalate earlier pushed prices to a high of $1,314.70.
However, support quickly gave way after Putin said he was prepared to discuss an end to the situation with the head of the Organisation for Security and Cooperation in Europe.
"The market could not break $1,315 during the last three days," Afshin Nabavi, head of trading at Swiss bullion house MKS, said. "It got fed up with that position, and this comment triggered some selling."
In Ukraine, both sides have been burying their dead as the country slides further towards war, with supporters of Russia and of a united Ukraine accusing each other of tearing the country apart.
European stocks pared losses, having fallen after results from brewer Carlsberg and bank Societe Generale showed the Ukraine crisis was starting to hurt large Western companies.
The dollar was little changed ahead of Yellen's comments, due from 1400 GMT.
Investors are braced for the possibility that dovish comments at her congressional hearings will further undermine the dollar, which hit a 6-1/2-month low against a currency basket on Tuesday.
That would typically be expected to boost gold, which benefits from looser monetary policy and a soft dollar.
"Janet Yellen's testimony ... in Washington is the big event on the calendar today, and the market is positioning itself for (more) dovish comments," Societe Generale said in a note. "That means that we would get a bigger reaction in both bond and FX markets to relatively hawkish comments."
ASIAN BUYING
Gold buying in Asia picked up on Wednesday as markets reopened after public holidays in Japan, Hong Kong and South Korea, dealers said.
Gold prices in Shanghai were trading $2 an ounce above the global benchmark, reversing the trend from recent months when prices were largely at a discount. Despite the price premiums, demand was muted, dealers said.
Chinese buying has been subdued as a weaker currency has discouraged importing banks from purchasing big quantities.
China's demand for gold bars fell nearly 44 percent in the first quarter of 2014 from a year ago, while total gold consumption edged up about 0.8 percent, the China Gold Association said on Wednesday.
Among other precious metals, silver was up 0.3 percent at $19.49 an ounce, while spot platinum was down 1 percent at $1,437.50 an ounce and spot palladium was down 1.1 percent at $804.72 an ounce.
The platinum group metals have been underpinned by a miners' strike at major producers Anglo American Platinum, Impala Platinum and Lonmin, which began on Jan. 23 and has affected 40 percent of global output.
"The market may be close to another leg higher if the strike is not resolved soon," HSBC said in a note.
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