Gold held on to sharp overnight gains on Wednesday, buoyed by a softer dollar and Federal Reserve chair Janet Yellen's remarks that the US central bank should be cautious in raising interest rates. Gold is highly sensitive to US monetary policy, as rising interest rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar. The metal slid 3 percent last week after hawkish comments from several Fed officials.
Spot gold had dipped 0.4 percent to $1,237.25 an ounce by 0656 GMT, after gaining 1.7 percent on Tuesday.
Some profit-taking following the overnight jump in prices has taken gold lower but the metal will consolidate around $1,235-$1,240, said MKS Group trader Sam Laughlin.