Gold prices eased on Wednesday, as the dollar climbed on reduced expectations of a sharp U.S. interest rate cut and ahead of Federal Reserve Chairman Jerome Powell's congressional testimony due later in the day.
Spot gold was down 0.5% at $1,391.35 per ounce as of 0717 GMT. U.S. gold futures, too, slipped 0.5% to $1,393.50 an ounce.
"A stronger U.S. dollar is clearly weighing on gold prices. Overall, it appears that the markets are backing away from their more dovish stance given that we have important minutes being released by the U.S. Fed," said Michael McCarthy, chief market strategist, CMC Markets.
"Also, people are locking in gains and reducing positions ahead of those key events," he added.
The minutes from Fed's previous meeting will be released later in the day.
The dollar edged toward a three-week high against a basket of major currencies on Wednesday, as fading expectations of an aggressive U.S. interest rate cut pushing Treasury yields higher.
A stronger dollar makes gold costlier for holders of other currencies.
Further gains in the greenback depend on the tone Federal Reserve Chairman Jerome Powell strikes during two days of Congressional testimony.
"Fading U.S. rate cuts expectations have imposed considerable headwinds on bullion's appeal as traders pivot towards a strong recovery in the U.S. dollar," Phillip Futures said in a note.
Expectations for a 50 basis point rate cut this month have evaporated, but investors still expect a 25 basis point cut due to weak inflation and trade war worries.
Lower interest rates would support gold because they reduce the opportunity cost of holding non-yielding bullion.
On the trade front, White House economic adviser Larry Kudlow said U.S. and Chinese trade officials held a "constructive" phone conversation on Tuesday.
Commerce Secretary Wilbur Ross said the U.S. government will issue licenses to companies seeking to sell goods to China's Huawei where there is no threat to national security.
Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.22% to 794.08 tonnes on Tuesday from 795.80 tonnes on Monday.
Spot gold is biased to break a support at $1,387 per ounce and fall into a range of $1,366-$1,377, according to Reuters technical analyst Wang Tao.
Among other precious metals, silver edged 0.2% lower to $15.07 per ounce, and palladium fell 0.1% to $1,545.88.
Platinum was flat at $805.98 an ounce.