Meanwhile, palladium hit a new record high of $1,263.44 an ounce, widening its premium over gold to around $25, helped by a sustained supply deficit and increased speculative interest. It was 2.1 percent higher at $1,259.05 per ounce by 1435 GMT.
Spot gold was down 0.1 percent at $1,237.31 per ounce, after hitting its highest since Oct. 26 at $1,241.86 on Tuesday. US gold futures were down 0.3 percent at $1,243.20 per ounce.
"The US Federal Reserve talking about the gradual increase in rates is going against some of the expectations that have been building up recently," said Saxo Bank analyst Ole Hansen.
The US central bank has increased interest rates three times this year but concerns about weaker growth have stoked bets that the Fed will end its tightening campaign sooner than previously thought.
However, New York Fed President John Williams on Tuesday said the Federal Reserve should expect to continue raising interest rates "over the next year or so" even while it pays close attention to possible risks highlighted by financial markets.
The central bank is widely expected to raise rates at its policy meeting on Dec. 18-19 and investors are keeping a close eye on signals for the future path of interest rates next year.
Higher interest rates increase the opportunity cost of holding non-yielding bullion.
World stocks tumbled to one-week lows on Wednesday, as declines by long-dated US bond yields and a renewal of trade concerns stoked fears of a downturn in the United States, the world's biggest economy, and pressured the dollar.
Gold prices have recovered about 7 percent from 19-month lows hit in mid-August.
"The momentum certainly appears to be with the bulls at the moment, especially if the dollar remains under pressure in the aftermath of the trade war truce," Craig Erlam, an analyst at OANDA, wrote in a note.
"I think a move back towards $1,260 and even $1,280 is perfectly feasible in the coming weeks."
In other precious metals, spot silver was steady at$14.52 per ounce. Platinum fell 1.4 percent at $792 per ounce after hitting its lowest since Sept. 17 at $787 earlier in the session.