PRECIOUS-Gold slips on US-China trade talk hopes; traders eye Fed policy

May 7 (Reuters) - Gold prices fell on Wednesday as optimism over potential U.S.-China trade talks weakened demand for safe-haven assets, while investors braced for the Federal Reserve's policy meeting later in the day.

FUNDAMENTALS

Spot gold XAU= lost 1.3% to $3,386.36 an ounce as of 0024 GMT. The metal had risen nearly 3% in the previous session.

U.S. gold futures GCcv1 fell 0.8% to $3,395.20.

U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China's top economic official in Switzerland this week, U.S. officials said, in what could be the first step toward resolving a trade war disrupting the global economy.

The U.S. and China imposed tit-for-tat tariffs on each other last month, triggering a trade war that fuelled fears of a global recession.

On Tuesday, U.S. President Donald Trump said he and top administration officials will review potential trade deals over the next two weeks to decide which ones to accept.

The market's focus will be on the Federal Open Market Committee (FOMC) meeting later in the day, where the U.S. central bank is expected to hold interest rates steady. The Fed has held its policy rate in the 4.25%-4.50% range since last December.

Fed Chair Jerome Powell's remarks are awaited for clues into the potential timing of future interest rate cuts.

Gold, traditionally seen as a hedge against economic and political uncertainties, thrives in a low-interest rate environment.

Spot silver XAG= eased 0.6% to $33.03 an ounce, platinum XPT= fell 0.4% to $980.95 and palladium XPD= lost 0.5% to $969.75.

DATA/EVENTS (GMT)

0030 Japan JibunBK SVC PMI, Comp Op Final SA Apr

0600 Germany Industrial Orders MM Mar

0600 Germany Manufacturing O/P Cur Price, Consumer Goods SA Mar

0830 UK S&P GLOBAL PMI: MSC COMPOSITE - OUTPUT Apr