Gold slides over 1% as Fed dashes imminent rate-cut hopes

Gold prices slipped more than one percent on Wednesday, moving away from a six-year peak hit on Tuesday, as US Federal Reserve officials played down expectations of aggressive rate cuts, while investors locked in profits following a strong rally.

Spot gold was down 1.2 percent at $1,405.60 per ounce as of 0339 GMT, heading for its first decline in seven sessions.

Gold prices hit their highest level since May 14, 2013 at $1,438.63 in the previous session.

US gold futures fell 0.4 percent to $1,413.30 an ounce.

"The combination of length that was built-up in the market over the short-term, coupled with Fed coming in and shaking the trees last night has really flushed out a lot of the weaker longs in the market," said Stephen Innes, managing partner at SPI Asset Management.

On Tuesday, US Fed Chairman Jerome Powell asserted the central bank's independence, stating that it is "insulated from short-term political pressures", pushing back against US President Donald Trump's demand for a significant rate cut.

While this hosed down expectations for a half-percentage-point cut at the Fed's July meeting, investors are still expecting at least a quarter percentage point reduction.

Separately, St. Louis Fed President James Bullard told Bloomberg Television he does not think the US economy is dire enough to warrant a 50-basis-point cut in July.

"Gold has had a strong 'melt up' over the last month. So some short-term profit taking is to be expected," said Heng Koon How, head of markets strategy at Singapore's United Overseas Bank.

Meanwhile, hurting bullion appeal, the dollar index rose 0.2 percent on Wednesday moving away from multi-month lows.

The United States hopes to re-launch trade talks with Beijing after Trump and Chinese President Xi Jinping meet in Japan during the G20 summit on Saturday.

"Not so big buying coming ahead of the weekend trade talks, gold could trade below $1,400 convincingly if things pretty much improve coming out of G20," Innes from SPI Asset Management said.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3 percent to 799.61 tons on Tuesday from 801.96 tons on Monday.

Spot gold may test a support at $1,404 per ounce, a break below could cause a loss to $1,387, according to Reuters technicals analyst Wang Tao.

Among other precious metals, silver fell 1.1 percent to $15.20 per ounce and palladium dipped 0.2 percent to $1,525.44.

Platinum lost 0.5 percent to $801.62 per ounce.