Gold slipped off a 10-month peak on Thursday, pressured by signals the U.S. Federal Reserve will not adopt as dovish a stance on monetary policy as previously thought and as investors booked profits, while palladium retreated from a record high.
Spot gold fell 1.08 percent to $1,324 per ounce at 1:56 p.m. ET, having hit $1,346.73 in the previous session, its highest since April 19.
U.S. gold futures settled $20.10 lower at $1,327.80.
"Most people had expected the Fed to remain dovish through the end of the year," said David Meger, director of metals trading at High Ridge Futures.
"Some comments in regards to the Fed being split on the rate hike (decision) before the end of the year toned down the dovish outlook for rates."
In the minutes of its latest meeting, the Fed said the U.S. economy and its labor market remained strong, prompting some expectations of at least one more rate hike this year. Higher rates tend to weigh on non-yielding gold.
Also, "there are new reports out today that the ongoing U.S.-China trade talks are going well. That's allowing a bit more trader and investor risk appetite to be present in the marketplace," Jim Wyckoff, senior analyst at Kitco Metals, wrote in a client note.
The U.S. and China have started to outline commitments in principle on the stickiest issues in their trade dispute, marking the most significant progress yet, according to sources familiar with the negotiations.
On the technical front, gold was within striking distance of the much-discussed $1,350-level, a key resistance over the years, but has failed to breach it, Meger added.
Meanwhile, palladium fell 1.38 percent to $1,468 per ounce, after having briefly surpassed the $1,500 level for the first time on Wednesday.
"Palladium touched $1,500 and that has attracted some profit taking in the short term, but the overall fundamental outlook remains the same," Saxo Bank analyst Ole Hansen said.
"The market is troubled by lack of supply at a time when emissions standards are being tightened and any correction at this stage will be looked upon as a potential buying opportunity," he said.
However, while prices have risen, holdings of palladium-backed exchange traded funds (ETFs) are now below 800,000 ounces compared with 1.3 million ounces in early 2018.
"Since physical metal is in strong demand, it may have forced some closure of holdings," Hansen said.