Gold prices on Thursday held near two-week lows touched in the previous session, as the dollar recouped losses after cautious comments from U.S. Trade Representative Robert Lighthizer dented investors' hopes for a closure to the tariff war with China.
As of 1:58 p.m. ET, spot gold was down 0.39 percent at $1,314.60 per ounce. U.S. gold futures settled $5.10 lower at $1,316.10.
The safe-haven metal slipped to its lowest since Feb. 15 at $1,316.43 in the previous session and dropped for the first time in five months.
Lighthizer told a Congressional hearing it is too early to predict the outcome of ongoing trade talks with Beijing and the United States will need to maintain the threat of tariffs on Chinese goods for years even if the two sides strike a deal.
"There is some uncertainty about the trade deal and some of the safe-haven (demand) has gone to the U.S. dollar. That has taken a bit of a bid from gold," said John Sharma, economist, National Australian Bank.
The dollar index, which measures the greenback against a basket of currencies, bounced back from three-week lows.
"Overall, gold is expected to go up with some corrections and prices will move around the $1,310-$1,330 levels depending on the dollar," Sharma said, adding, "main support comes from Federal Reserve's dovish stance and a lot of central banks are keen on accumulating gold."
The U.S. Central Bank will stop shrinking its $4 trillion balance sheet later this year, Fed Chairman Jerome Powell said on Wednesday, ending a process that investors say works at cross-purposes with the Fed's current pause on interest-rate hikes.
During his testimony to the Senate Banking Committee on Tuesday, Powell reiterated that the Fed will be patient in hiking interest rates.
"The precious metal's recent consolidation is supported by the indecision the financial markets have in pricing in what will be the Fed's next move," OANDA senior market analyst Edward Moya said in a note.
"Gold may struggle climbing higher until we see further deterioration in U.S. data, that would seal the market expectation for the next move to be a rate cut."
Investors are also monitoring the tensions between India and Pakistan, with the two countries engaged in retaliatory attacks, analysts said.
Spot palladium rose 0.82 percent higher to $1,541 on Thursday, after retreating from its all-time peak of 1,565.09 per ounce scaled earlier in the week.
The autocatalyst surged about 21 percent so far this year on widening supply tightness in the market.