Gold rose in cautious trade ahead a US Federal Reserve rate decision on Wednesday, but a lack of follow-through buying capped gains around $647 an ounce. Spot gold hit a high of $647.40 an ounce and was at $646.40/646.80 an ounce by 0333 GMT, up from $645.30/646.30 an ounce late in New York on Tuesday, when it rose nearly $3 after crude oil rallied more than 5 percent.
"There's initial buying in Tocom but the market is stuck around the $647 level. The oil price doesn't move much either and there's a lack of follow-through buying in gold," said a dealer in Hong Kong. "I looks like $648 will be the upside for the time being," said the dealer, adding that jewellers were also on the sidelines.
Benchmark gold futures on the Tokyo Commodity Exchange, currently December 2007, rose to an intraday high of 2,555 yen per gram before slipping to 2,548 yen ($20.95), still up 10 yen from Tuesday's close.
US crude oil futures were little changed near $57 a barrel on Wednesday ahead of US inventory data, after rising 5.5 percent the previous day as new fund money moved into the market.
Trading was slow in the physical sector, with some jewellers in China still reluctant to buy more gold ahead of the Lunar New Year celebration in February, despite the price falling from a 5-1/2 month high of $654 hit last week.
"In the last few weeks, gold's been around $630-$640. There's been some hesitation to buy, especially from the manufacturing side," Albert Cheng, the World Gold Council's Far East managing director, told Reuters on Tuesday.
"If they are reluctant or not building stocks before Chinese New Year, then even if there's a bump-up in demand, the stocks won't be there. There's a lag of two to three weeks."
"It's a problem of capital outlay. If they buy, they put up capital, so they are reluctant," he said. In the currency market, the dollar held near a four-year high against the yen as investors waited for a Fed policy statement for clues about the course of US interest rates, which may also determine the direction of gold and other precious metals.
The US central bank is widely expected to keep interest rates unchanged at 5.25 percent when it wraps up its two-day meeting, and investors are focusing on whether the Fed has become more optimistic on the economy. The dollar was trading at 121.66 little changed from late US trade and near the 122.20 yen hit on Monday, its strongest since December 2002.
The euro was at $1.2965. Investors also look ahead to the release of key US economic the fourth-quarter GDP data on Wednesday, the Personal Consumption Expenditure Index on Thursday and January employment data on Friday.
Silver edged up to $13.33/13.37 an ounce from $13.31/13.38 late in New York. Platinum was steady at $1,170/1,175 an ounce. Palladium hardly changed at $335/340 an ounce.