Gold prices fell on Wednesday as optimism over potential US-China trade talks dampened demand for safe-haven assets, while investors prepared for a Federal Reserve policy meeting later in the day.

Spot gold fell 1.2% to $3,388.67 an ounce by 0225 GMT. The metal had gained nearly 3% in the previous session.

US gold futures fell 0.7% to $3,397.70.

"Gold appears to be pulling back amid the broad risk-on movement across the market ... this is a pro-cyclical configuration that may echo optimism amid hints that the US and China have begun real trade negotiations," said Ilya Spivak, global head of macro at Tastylive. GLOB/MKTS

US Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer are set to meet with Chinese economic official He Lifeng in Switzerland later this week for talks.

The two countries imposed tariffs on each other last month, sparking a trade war that has stoked fears of a global recession.

On Tuesday, U.S. President Donald Trump said he and top administration officials would review potential trade deals over the next two weeks to decide which one to accept.

Market focus will be on the Federal Open Market Committee (FOMC) meeting later in the day, where the U.S. central bank is expected to keep interest rates steady.

The FOMC will remain vague to maintain as much flexibility as possible as it tries to understand what the trade war means for growth and inflation, Spivak added.

Traders are expecting an 80 basis point rate cut this year, starting in July.

Fed Chair Jerome Powell's remarks are also awaited for clues on the timing of future rate cuts.

Gold, traditionally seen as a hedge against economic and political uncertainty, thrives in a low-interest-rate environment. Spot silver fell 0.9% to $32.93 an ounce, platinum fell 0.6% to $979.07, and palladium fell 0.4% to $970.28.(Newsmaker23)

Source: Reuters