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Gold price (XAU/USD) tumbles to a three-week low near $3,950 during the early Asian session on Wednesday. The precious metal extends its downside as hopes for progress in US–China trade talks dimmed its safe-haven allure. Traders will keep an eye on the Federal Reserve's (Fed) interest rate decision later on Wednesday. 

The Gold price retreats from its record high, with profit-taking weighing on the yellow metal after strong gains in recent months. Signs of a thaw in US-China trade tensions and cooling geopolitical tensions reduce the demand for safe-haven assets such as Gold. 

US President Donald Trump said that he expected to reach a trade agreement with China in the coming days. US and Chinese officials stated on Sunday that they'd reached an initial consensus for Trump and Chinese leader Xi Jinping to try to finalize during a high-stakes meeting later on Thursday. 

“The U.S.-China trade tensions have really diminished, with a possible trade deal later this week after a summit meeting between Presidents Xi and Trump. That's bearish for the safe-haven metals," said Jim Wyckoff, senior analyst at Kitco Metals.

On the other hand, the rising bets of a Fed rate cut might cap the downside for the precious metal. The US central bank is widely expected to cut its benchmark interest rate by 25 basis points (bps) at the conclusion of its October meeting on Wednesday. This would bring the Federal Funds Rate target to 3.75%-4.00%.

Markets are now pricing in nearly a 100% possibility of a 25 bps reduction, according to the CME FedWatch tool. This would be the second consecutive rate cut, following the September policy meeting. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal. 

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