Spot gold was unchanged at $1,329.38 an ounce by 1:38 pm EST (1838 GMT), after earlier dropping to $1,325.20. US April gold futures settled up 90 cents, or 0.1 percent, at $1,332.10 per ounce. "The bounce after yesterday's decline has been severely limited by dollar strength," said James Steel, chief metals analyst at HSBC Securities.
Gold prices have fallen more than 1 percent this week as the dollar pulled back from three-year lows against a currency basket, and remain highly sensitive to any further sign of strength in the US unit. The metal's reaction to the US dollar comes as markets anticipate a more hawkish stance by the Fed, Mitsubishi analyst Jonathan Butler said.
"Expectations of higher rates, seen in yields and probably in the language of the Fed minutes later today, are underpinned by signs of rising inflation," Butler added. The metal slid 1.3 percent on Tuesday, the most on any day since December 7, as a rise in US yields boosted the dollar and weakened the appeal of non-interest bearing gold. Benchmark 10-year Treasury yields hovered near a four-year peak on Tuesday.
The minutes will be watched for comment on inflation pressures in the world's biggest economy, which could speed up the pace of rate hikes. Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Markets are also anticipating minutes from the European Central Bank on Thursday, Steel added. Interest in physical gold has been muted this week during the Lunar New Year holiday across much of Asia, including major consumer China.
Among other precious metals, silver rose 0.9 percent to $16.61 an ounce, up from a one-week low of $16.37, while palladium dropped 0.7 percent to $1,026.60 and platinum dropped 0.7 percent to $992.50, off a $988 low.