Gold rose on Wednesday, as softer bond yields and uncertainty about growth amid fears over the new Omicron variant of coronavirus lifted its appeal.

Spot gold rose 0.5% to $1,781.86 per ounce by 0551 GMT. US gold futures gained 0.3% to $1,782.20.

Offering support to bullion, benchmark 10-year US Treasury yields steadied near Tuesday's close which was the lowest in three-weeks.

Spot gold may drop to $1,758; downtrend resumed

Gold fell to a one-month low on Tuesday after Federal Reserve Chair Jerome Powell said the Fed will discuss whether to end their bond purchases a few months earlier than previously anticipated in its December meeting and the word "transitory" is no longer the most accurate term to describe current inflation.

"Powell's comments create more headwinds for gold in the short-term, but it doesn't alter anything materially because a faster tapering than previously expected was already priced in," Harshal Barot, a senior research consultant for South Asia at Metals Focus said.

"There's still a lot of uncertainty about growth given the new virus variant and whether inflation is transitory or not, so gold will contain to find support at lower levels."

Fed officials are not happy with inflation above the central bank's 2% target and bringing actual inflation down will be important to keeping expectations anchored near the central bank's goal, Fed Vice Chair Richard Clarida said.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising non-interest bearing gold's opportunity cost.

"The Fed will raise rates once in the second half of next year, and between now and then inflation will remain elevated, resulting in still deeply negative real rates, which is positive for gold," Credit Suisse said in a note.

Spot silver rose 0.4% to $22.88 an ounce. Platinum gained 2.3% to $955.37 and palladium added 2.1% to $1,774.55.