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Spot gold was down 0.14 percent at $1,291.25 per ounce, having touched its lowest level since March 7 at $1,284.76 in the previous session. U.S. gold futures settled $0.10 lower at $1,295.30.
“Investors are moving into racier equity markets rather than slower moving precious markets,” said Fawad Razaqzada, market analyst with Forex.com
However, he said that fundamental factors would likely continue to underpin gold, even if equity markets continued to rally.
“With the U.S. Federal Reserve being dovish, the dollar being low, and yields being lower, the fundamental environment for gold itself is positive.”
Signs of progress in U.S.-China trade talks this week and decent factory activity data from both countries in recent days has lifted investor sentiment and taken the edge off global recession fears.
The dollar, which was sought as a safe-haven in preference to gold last year against a backdrop of the unfolding trade war, was down 0.3 percent against a basket of currencies on Wednesday , making bullion cheaper for holders of other currencies.
ActivTrades chief analyst Carlo Alberto De Casa said in a note that a return to the psychological threshold of $1,300 would be a positive signal for gold, while a fall below $1,280 could open the way for a further decline to $1,260. He said he saw the latter scenario as the least likely for the time being.
Investors are now waiting for clues on the strength of the U.S. economy from non-farm payrolls data due on Friday.
Meanwhile, British Prime Minister Theresa May will meet opposition leader Jeremy Corbyn to thrash out a Brexit compromise, a gamble that could finally see a European Union divorce deal agreed but also tear her party apart.
Indicative of investor sentiment toward bullion, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to their lowest since March 8 at 768.10 tonnes on Tuesday.
Among other precious metals, silver was up 0.12 percent at $15.13 per ounce, having touched its lowest level since late December at $14.90 on Tuesday.
“The fact that there was no willingness from the sellers to hold the ground below $15 suggest to me that demand has outweighed supply and … we could see prices start to climb higher from here,” Forex.com’s Razaqzada said.