Gold prices fell on Wednesday as optimism over potential US-China trade talks dampened demand for safe-haven assets, while investors braced for the Federal Reserve's policy decision due later in the day.

Spot gold fell 1.3% to $3,383.88 an ounce, as of 0432 GMT. The metal rose nearly 3% in the previous session.

US gold futures fell about 1% to $3,391.80.

"Gold appears to be weakening 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

U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet with Chinese economic official He Lifeng in Switzerland later this week for talks.

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

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

Market focus will also 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 Chairman Jerome Powell's remarks are also awaited for clues on the timing of potential future rate cuts.

Gold, traditionally seen as a hedge against economic and political uncertainty, thrives in a low-interest-rate environment. On the geopolitical front, India said it lashed out at Pakistan ahead of a deadly attack on tourists in Kashmir last month. Pakistan reported eight deaths and said it was responding to the Indian attack.

Spot silver fell 0.7% to $33.01 an ounce, platinum fell 0.1% to $983.60 and palladium fell 0.7% to $967.64. (Newsmaker23)

Source: Reuters