Gold rose to near a more than eight-month peak on Wednesday, supported by a muted dollar as investors awaited the Federal Reserve's policy decision and US-China trade talks later in the day. Spot gold was up 0.1 percent at $1,313.47 per ounce at 1238 GMT, after touching $1,315.93, its highest since May 14, 2018 earlier in the session. US gold futures rose 0.3 percent to $1,312.30.
"Gold is hesitating just as the dollar is pausing for breath ... We have the Fed meeting later, and investors are wondering what the Fed is going to do with regards to the pace of balance sheet reduction," said Fawad Razaqzada, an analyst with Forex.com. Markets expect Fed officials will reinforce their recent dovish stance given a stalemate on global trade, signs of a slowdown in the US economy, and waning business and consumer confidence.
The Fed raised interest rates four times last year. "If the tightening cycle is indeed coming to an end, as many believe, you can expect the dollar to weaken, which will be gold positive," said Ross Norman, chief executive at Sharps Pixley. The dollar index against a basket of six major currencies was little changed, having slipped to a two-week low overnight after US Treasury yields declined ahead of the Fed's statement.
Gold tends to gain on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion and weighs on the dollar, making bullion cheaper for holders of other currencies. Investors are also concerned that charges against China's Huawei Technologies Co. Ltd. over US sanctions against Iran could complicate US-China trade talks.
China's Vice Premier Liu He is due to meet US Trade Representative Robert Lighthizer later in the day. Underscoring investor interest gold, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1 percent to 823.87 tonnes on Tuesday, their highest since June.
SPDR gold holdings have climbed 4.6 percent so far this month, their highest since September 2017. The key question for investors is whether gold can hold above the $1,300 mark, Razaqzada said. "And so far the indication has been that it can, but the next test would be the highs from last year, around $1,365."
Meanwhile, silver climbed 0.6 percent to $15.93 per ounce, having earlier scaled a peak since July 2018, at $15.98. Palladium fell 0.7 percent to $1,336.78, while platinum gained 0.3 percent to $812.
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