Rising US interest rates also pressured bullion.
Spot gold lost 0.2 percent at $1,272.44 by 1:36 p.m. EDT (1736 GMT). US gold futures for August delivery settled down $4.10, or 0.3 percent, at $1,274.50 per ounce.
Trade tensions between the United States and China are showing no signs of easing. On Tuesday, a White House trade adviser said Beijing had underestimated the US president's resolve to impose more tariffs.
That followed Washington threatening to impose tariffs on $200 billion of Chinese goods and Beijing saying it was raising tariffs on $50 billion of US goods.
Gold, seen as a safe haven asset, usually gains from geopolitical or economic tensions, but has struggled this time around because the dollar has risen strongly, making dollar-priced gold costlier for non-US investors.
"This environment we've had with interest higher rates and a higher US dollar has kind of halted the rise of gold at least for the short term," said Will Rhind, CEO of GraniteShares.
Higher US interest rates make gold a less attractive investment since it does not bear interest.
However, "the reason it hasn't fallen as much as you'd expect is that safe-haven demand has sustained the price," said Capital Economics analyst Simona Gambarini.
The US dollar was little changed, hovering near an 11-month peak against a basket of major currencies as China's signal of a tolerance of a stronger yuan offset anxiety about the global trade conflict.
World markets recovered from a recent selloff on the trade tensions, while Treasury yields rose after the Federal Reserve chairman said the US central bank should continue with a gradual pace of interest rate increases.