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Gold price (XAU/USD) trades in positive territory near $4,985 during the early Asian session on Wednesday. The precious metal extends the rebound after a historic and volatile sell-off last week. Traders weigh the next round of US economic signals and the broader demand for safe-haven assets.

CNBC reported on Tuesday that the US military shot down an Iranian drone that "aggressively" approached the USS Abraham Lincoln aircraft carrier in the Arabian Sea. The incident occurred as tensions in the Middle East are high, with US President Donald Trump weighing potential military strikes against the Islamic Republic.

Iran demanded that talks with the US this week take place in Oman rather than Turkey, and that the scope be limited to two-way conversations on the nuclear issue only, complicating an already delicate diplomatic effort. Traders will closely monitor the developments surrounding US-Iran negotiations. Any signs of escalating tensions between the US and Iran could boost traditional safe-haven assets such as Gold in the near term. 

On the other hand, the nomination of Kevin Warsh as Federal Reserve (Fed) chairman might cap the upside for the yellow metal. Markets see Warsh as a "hawkish" pick for Fed Chair and likely to keep interest rates elevated.

Traders dialed back expectations for a Fed rate cut following the Fed's January pause and the nomination of Warsh. Financial markets currently priced in nearly a 66% odds of a rate reduction at the June policy meeting, according to the CME FedWatch tool. 

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