Gold firms as dollar softens with market focus on Fed decision

Gold prices rose on Wednesday on a softer dollar, although investors refrained from placing big bets ahead of a key US Federal Reserve policy statement that could provide cues on its pace of interest rate hike.

Spot gold was up 0.2 per cent at $1,650.62 per ounce while US gold futures gained 0.3 per cent to $1,653.80.

The dollar index dipped 0.2 per cent, making the greenback-priced gold less expensive for holders of other currency.

"If we do get any sort of story for US dollar weakness over that 50-basis-point hint from the Fed, then it shouldn't be too hard for gold to get back up to $1,670, $1,680 even over the coming sessions," said City Index analyst Matt Simpson.

The US Fed is scheduled to release its policy statement followed by Chief Jerome Powell's press conference.

While a 75-basis-point rate increase is largely priced in, investors will seek cues on weather there is a possibility of Fed slowing down its tightening pace.

For the December meeting, the traders are split on the odds of a 75- or 50-bps rate hike.

"The bigger picture is that the Fed is still going to continue hiking rates, they could be up to 5 per cent, but we're still close at the end of that hiking cycle," Simpson added.

Data on Tuesday showed US job openings unexpectedly rose in September, highlighting a resilient labour market and that rapid interest rate hikes have yet to bite hard in the real economy.

Higher interest rates increase the opportunity cost of holding the non-yielding gold.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.45 tonnes to 919.12 tonnes on Tuesday.

Spot silver rose 0.1 per cent to $19.68 per ounce, having hit a three-week peak on Tuesday.

Platinum gained 0.9 per cent to $951.50 and palladium climbed 1.4 per cent to $1,905.99.