Gold bounced from a three-week low as the U.S. dollar eased ahead of the U.S. Federal Reserve`s meeting later on Wednesday, which investors expect to provide further clues on the pace of 2018 interest rate increases.
The Fed will make an announcement on interest rates at 2 p.m. EST on Wednesday and new Fed Chairman Jerome Powell will hold his first news conference shortly after.
With a rate rise of 25 basis points seen as a done deal, investors will be on the lookout for whether the Fed forecasts four increases in 2018, one more than previously expected.
Spot gold was up 0.9 percent at $1,322.01 an ounce by 1:33 p.m. EST (1733 GMT), having dropped as low as $1,306.91 in the previous session.
U.S. gold futures for April delivery settled up $9.60, or 0.7 percent, at $1,321.50 per ounce.
"A 25 base hike is priced in, so the potential impact could come from the statement and what happens to the Fed projection for inflation and rate expectations in 2018," said Capital Economics commodities economist Simona Gambarini.
The dollar index, which measures the greenback against a basket of six major currencies, slipped after climbing to its highest since March 1 in the previous session.
A weaker greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies.
"People are starting to unwind those long dollar short gold positions a little early, causing a little buoyancy in gold and a little softness in the dollar," said George Milling-Stanley, head of gold strategy at State Street Global Advisors. "The real gains will come in the next month."
Milling-Stanley expects gold to rise to the $1,350-$1,400 level.
Expectations for a faster pace of U.S. rate hikes have caused gold to fall more than 3 percent from a 1-1/2 year high reached in January.
Higher U.S. interest rates typically reduce demand for non-yielding bullion, though analysts said that the possibility of an escalation in geopolitical tensions could cushion gold.
U.S. President Donald Trump is expected to unveil up to $60 billion in import duties on Chinese goods by Friday, following on from tariffs he has imposed on steel and aluminum.
Investors are worried that Trump`s actions could escalate into a trade war if China and other countries retaliate, threatening global growth.
Among other precious metals, silver added 1.5 percent at $16.42 an ounce, hitting near a one-week high at $16.52.
Platinum was up 0.8 percent at $948 per ounce and palladium rose 1 percent at $988 per ounce.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)