Gold flirting with session lows, just above $1340 level

Gold prices edged lower through the early European session on Wednesday and extended the previous session's intraday pullback from levels beyond the $1350 region.

The precious metal started losing positive momentum on Tuesday following the US President Donald Trump's optimistic trade-related comments on Tuesday, saying that he will be having an extended meeting with his Chinese counterpart Xi next week on the sidelines of the G-20 meeting in Japan.

The remarks came on the back of dovish remarks by the ECB President Mario Draghi and boosted investors' appetite for riskier assets. The same was evident from a strong rally across equity markets and weighed heavily on the precious metal's safe-haven status, prompting some long-unwinding trade. 

The risk-on mood also assisted the 10-year US Treasury bond yield to rebound from the lowest level since September 2017, which provided a minor lift to the US Dollar and further collaborated towards exerting some additional downward pressure on the dollar-denominated commodity.

With the positive trade developments turning out to be a key factor influencing the price action, bullish traders largely shrugged off increasing bets for an eventual Fed rate cut move by the end of this year, though might lend some support to the non-yielding yellow metal and help limit further losses.

Hence, Wednesday's key focus will remain on the latest FOMC monetary policy update. The US central bank is widely expected to leave interest rates unchanged but could lay the groundwork for interest rate cuts in coming months, which will now help determine the commodity's near-term trajectory.

Technical levels to watch