"Traders are disappointed by the divergence of future rate cut path and the market is unwinding expectations of a few more cuts in the months to come," said Margaret Yang Yan, a market analyst at CMC Markets. Lower interest rates reduce the opportunity cost of holding non-yielding gold, and weigh on the dollar. Spot gold inched 0.1% higher to $1,495.36 per ounce as of 0636 GMT, after falling as much as 1% on Wednesday. However, US gold futures were down 0.8% at $1,503.
Central banks globally are facing increasing pressure to dole out monetary support for flagging economies as the US-China trade dispute hits global economic growth. "Gold looks vulnerable. If the Fed is right to proceed with caution - meaning the global environment is not as dire as stimulus-hungry markets seem to envision - that implies less scope for overall easing," said Ilya Spivak, a senior currency strategist at DailyFx.
A close below $1,480 would set the stage for a retest of the $1,400 level initially and may then pave the way for a deeper pullback, he said. Meanwhile, the Bank of Japan kept monetary policy steady but said it would re-examine economic and price developments more thoroughly at its next policy meeting, amid growing risks to the country's fragile economic recovery. Spot gold is poised to break a support at $1,488 per ounce and fall to the next support at $1,446, according to Reuters technical analyst Wang Tao.