Gold hits pause after record run on safe-haven inflows

"It seems as if gold turns every market development into a price increase," said Alexander Zumpfe, a precious metals trader at Heraeus.

Federal Reserve policymakers on Tuesday said they think it would be "reasonable" to cut U.S. rates three times this year, even as stronger economic data recently has sown doubts about that outcome.

Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding the non-yielding bullion.

"The U.S. economy is surprising with its strong performance, which would make a first interest rate cut in June less likely and thus weigh on the gold price – but the precious metal is holding its value," Zumpfe said.

Investors now await remarks from Fed Chair Jerome Powell later in the day for clues on when the central bank will deliver its first rate cut.

Meanwhile, oil prices rose as escalating geopolitical risks — including Ukrainian drone attacks on Russian refineries and tensions between Israel and Iran– raised worries about tighter supplies. [O/R]

"With commodity prices rising in general, it brings the risks of another round of inflation – so perhaps investors are hedging for inflation," City Index senior analyst Matt Simpson said.

Elsewhere, silver rose 0.5% to $26.24 per ounce, platinum was steady at $918.74 and palladium fell 1.1% to $992.32.