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The U.S. economy could be ready for another interest rate hike in June, according to the Fed's April policy meeting minutes released on Wednesday. The central bank had lifted rates in December for the first time in nearly a decade.

"Just as the prospect of extended low rates and a weaker dollar provided commodities with considerable tailwinds earlier in the year, the reverse could be at work now," said INTL FCStone analyst Edward Meir.

"As rising rates and a stronger dollar pressures prices lower, gold could be a front-casualty in such a retreat."

Bullion has gained about 19 percent this year on speculation that the Fed has slowed its expected pace of rate increases on concerns over volatility in global markets. A possible hike in June suggests the Fed is closer to tightening monetary policy earlier than investors had expected.

Fed Vice Chairs William Dudley and Stanley Fischer are due to speak later in the day and the markets will be eager to get more details on the Fed's thinking.

Bullion investors will also be eyeing data on U.S. weekly jobless claims on Thursday for trading cues.

"There is always some profit taking coming in the market between $1,285 and $1,295, while buying occurs between $1,260 and $1,270," MKS SA head of trading Afshin Nabavi said. "Only if physical demand comes in, we are likely to see prices above $1,300."

Gold prices broke though range support at 1261.70, the 23.6% Fibonacci expansion, opening the door for a test of rising channel support in play since mid February (now at 1236.70). Alternatively, a reversal back above 1261.70 sees the next upside barrier in the 1294.26-1307.49 area (January 22 2015 high, 38.2% level) according to Currency Strategist in DailyFX.

Reference: Reuters, DailyFX, Daily Times