Gold (GC=F)

Gold prices extended their sharp retreat for a third straight session on Wednesday, as investor appetite for the safe-haven asset diminished amid signs of renewed trade dialogue between the United States and key global partners.

Gold futures fell 2.5% to $3,237.20 per ounce at the time of writing, while the spot price declined 1.6% to $3,234.83 an ounce.

"There is some optimism that there will be some de-escalation of the trade war between the US and China," David Meger, director of metals trading at High Ridge Futures, told Reuters.

The pullback comes after reports from Chinese state-affiliated media indicated that the Trump administration had reached out to Beijing to reopen trade negotiations.

Read more: FTSE 100 LIVE: Stocks rise as China says US has ‘reached out’ for tariff talks

Market sentiment has been buoyed further by Trump's efforts to ease auto tariff impacts through executive orders signed on Tuesday, and his comments on Wednesday suggesting "potential" trade deals with India, South Korea, and Japan.

The shift in tone has eroded demand for gold, which surged to an all-time high of $3,500.05 per ounce last week amid escalating global trade tensions and geopolitical uncertainty.

Despite the recent pullback, analysts remain broadly bullish. A quarterly Reuters poll published this week projected an average annual gold price above $3,000 for the first time, citing persistent trade frictions and a global pivot away from the US dollar as key drivers.

Pound (GBPUSD=X, GBPEUR=X)

The pound edged lower against the dollar in early European trading, slipping 0.2% to $1.3297, as the greenback strengthened on the back of fresh US economic data.

Despite signs of economic weakness, including a contraction in US GDP in the first quarter and tepid job growth in April, the dollar gained broadly. The dollar index (DX-Y.NYB), which measures the greenback against a basket of currencies, rose 0.6%, to $100.01.

Analysts suggested the move may be driven more by positioning than fundamentals. "The recent dollar bounce may be a temporary position adjustment as markets await further developments," said Reuters analyst Paul Spirgel.

Read more: Lloyds profit falls, sets aside £100m amid tariff uncertainty

Weaker labour market indicators and the surprise economic contraction are fuelling speculation that the US Federal Reserve could pivot to rate cuts in the coming months. Market pricing reflected in the CME FedWatch tool suggests a 62.5% probability that the Fed will lower interest rates at its June policy meeting. For May, traders largely expect the central bank to hold rates steady at 4.25%-4.50%.