Gold prices recouped losses to rise over 1% on Wednesday as the dollar slid after US Federal Reserve Chairman Jerome Powell fanned expectations of an interest rate cut, citing risks to the US economy.
Powell said concerns about trade policy and a weak global economy "continue to weigh on the US economic outlook" and the Fed intended to "act as appropriate" to sustain a decade-long expansion.
Spot gold rose 1% to $1,411.08 per ounce as of 1:19 pm ET (1719 GMT), having made its way to a high of $1,412.60 an ounce. Prices had dropped to $1,389.55 earlier in the session.
US gold futures for August delivery rose 0.9% to $1,413.30 per ounce.
"Over the past four days we had gold pulling in from a high. Powell's comments on trade war adding uncertainties in the US economy left doors open for a rate cut, giving investors an opportunity to buy gold when it was seeking a support," said Michael Matousek, head trader at US Global Investors.
Although expectations for a 50-basis-point rate cut at a Fed meeting later this month have evaporated after forecast-beating job gains were reported last week, investors still expect a 25-basis-point cut.
"But now, there is chatter in the market about a little bigger rate cut than that, which has fueled some animal spirit in the gold market," Matousek said.
Powell's comments also prompted the dollar index to decline as much as 0.4% against a basket of other currencies.
"We still think there are upside risks, and dips towards $1,375 and below $1,375 are an opportunity to go long in gold," said Suki Cooper, precious metals analyst at Standard Chartered Bank.
"The macro factors are still supportive (of gold) but the near term headwinds are likely to come from weaker physical markets and any temporary bouts of dollar strength or a bounce in yields."
Other precious metals also rose, with silver up 0.7% at $15.20 per ounce, and platinum gained 1.9% to $821.00 per ounce.
Palladium was 2.9% higher at $1,591.50 per ounce, having hit $1,598 earlier in the session, its highest since March 22.
Palladium is used as an agent to reduce the effect of harmful emissions from petrochemical plants.
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