Gold was within sight of its highest level in two weeks on Wednesday but gains were capped as investors looked ahead to the end of a two-day Federal Reserve meeting for further direction.
Spot gold hit a high of $659.50 an ounce and was at $659.40/660.40, up from $658.40/659.40 late in New York on Tuesday, when it rallied to a two-week high of $660.60 as a weaker dollar triggered fund and physical buying.
"Gold is looking reasonably solid at the moment," said Darren Heathcote of Invested Australia in Sydney.
The metal was likely to re-test on Tuesday's high and trade in a new range of $660 to $670 range, said Heathcote, adding that the market would also focus on policy comments about the US economy from the Fed meeting.'
The Fed is seen leaving rates steady at 5.25 percent but any mention of the recent sell-off in equity markets or easing inflation could further weaken the dollar.
A weaker dollar boosts gold's appeal as an alternative investment.
Dealers said gold's rise on Tuesday was also related to a report that China would stop stockpiling foreign exchange reserves, which dragged down the dollar. But analysts believed the fall was unwarranted and that People's Bank of China Governor Zhou Xiaochuan's comment about China's $1 trillion stash of reserves had been incorrectly interpreted.
The Emerging Markets magazine, an Euromoney publication, as saying, "many people say that foreign exchange reserves in China are (already) large enough, quoted Zhou. We do not intend to go further and accumulate reserves."
Dealers were scouring Zhou's speech, with some suspecting he spoke in Chinese and his comments may have been translated inaccurately.
The euro was little changed at $1.3315. In other precious metals, silver rose to $13.31/13.34 an ounce from $13.29/13.34 late in New York. Platinum eased to $1,229/1,234 an ounce from $1,230/1,235 an ounce. Palladium dipped to $349/354 an ounce from $350/354 an ounce.
The Japanese gold market was closed for a spring holiday. Benchmark gold futures for February delivery on the Tokyo Commodity Exchange ended 5 yen per gram higher at 2,503 yen ($21.35) on Tuesday.
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