Gold prices weakened on Wednesday as the U.S. dollar strengthened, retreating from a record high reached in the previous session, while investors awaited economic data due later this week for further clues on the Federal Reserve's policy direction.

Spot gold fell 0.8% to $3,734.58 an ounce, as of 1:56 PM ET (5:56 PM GMT), after hitting a record high of $3,790.82 on Tuesday. U.S. gold futures for December delivery closed down 1.2% at $3,768.1.

The U.S. dollar index rose about 0.6%, making dollar-priced bullion more expensive for holders of other currencies. The benchmark 10-year Treasury yield also moved higher. "Gold is still digesting some comments from the Federal Reserve yesterday and also geopolitical tensions with Russia. Gold prices are a little cautious ahead of the release of some economic data," said Phillip Streible, chief market strategist at Blue Line Futures.

Fed Chairman Jerome Powell offered no new clues on the future direction of interest rates on Tuesday, emphasizing that the central bank must carefully balance the risks of stubborn inflation with a slowing labor market.

The market is pricing in two additional 25 basis point rate cuts this year—one in October with a 94% probability and another in December with a 77% probability, according to the CME FedWatch tool. Focus is now on Thursday's weekly U.S. jobless claims data and Friday's release of the U.S. Personal Consumption Expenditures Index, the Fed's preferred inflation measure.

On the geopolitical front, the Ukrainian military said Wednesday that it attacked two oil pumping stations overnight in the Volgograd region of Russia. Gold, as a safe-haven asset, becomes more attractive during periods of geopolitical and economic uncertainty. Gold also tends to thrive in low-interest rates because it is a non-yielding asset.

Spot silver fell 0.4% to $43.84 an ounce. Platinum fell 0.7% to $1,468.44, and palladium fell 0.7% to $1,211.45.(alg)

Source: Reuters