Gold prices edged lower on Wednesday due to a slight uptick in the dollar, although hopes that the U.S. Federal Reserve would likely cut interest rates by the first half of next year kept bullion near a seven-month peak.
Spot gold fell 0.1% to $2,039.69 per ounce by 1215 GMT, after hitting its highest since May 5. U.S. gold futures for December delivery were up 0.1% at $2,040.90 per ounce.
"A weaker US dollar and lower interest rates following slightly more dovish comments from Fed officials has lifted gold prices over the last 24 hours. The next resistance will likely be the record high of 2020," said UBS analyst Giovanni Staunovo.
The dollar index edged 0.1% higher against its rivals. However, the U.S. dollar was poised to mark its worst monthly performance in a year, increasing appeal among other currency holders.
Yields on 10-year Treasury notes fell to an over two-month low.
Traders are now pricing in a more than 70% chance of rates easing in May after Fed Governor Christopher Waller flagged a possible rate cut in the months ahead, up from 50% on Tuesday, according to the CME's FedWatch Tool.
Lower rates reduce the opportunity cost of holding non-interest-bearing bullion.
"An environment of persisting economic uncertainty and the accompanying prospect of lower interest rates would bode well for gold prices," said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.
"Aside from rates and geopolitical uncertainty, the U.S. fiscal trajectory will increasingly become a focus and, unless changed dramatically, should benefit gold."
Investors are now looking ahead to the revised U.S. third-quarter GDP figures due at 1330 GMT and key PCE data - the Fed's preferred inflation gauge - on Thursday. Spot silver fell 0.2% to $24.95 per ounce and platinum slipped 0.9% to $931.24. Palladium dropped 0.9% to $1,045.77 per ounce.
(Reporting by Anjana Anil and Ashitha Shivaprasad in Bengaluru; Editing by Sharon Singleton and Krishna Chandra Eluri)