Spot gold was up 0.3% at $1,932.12 per ounce, as of 0255 GMT. U.S. gold futures also rose 0.3% to $1,934.70.
The dollar index slipped 0.3%, making greenback-priced bullion attractive for buyers holding other currencies. [USD/]
Gold continues to build nicely to the upside and the current narrative of the Fed having to reduce or stop rate hikes in the next few months is lending support, said Clifford Bennett, chief economist at ACY Securities.
Traders expect the U.S. central bank to slow the pace of its rate increases at the Jan. 31-Feb. 1 policy meeting to 25 basis points, even though some Fed officials have signalled that their battle against inflation is far from over. The Fed raised rates by 50 bps last month after delivering four straight 75-bp hikes. [FEDWATCH]
Investors tend to prefer gold when rate-hike expectations recede, as lower rates reduce the opportunity cost of holding zero-yield bullion.
Gold prices could trade around current levels in the short term, but will accelerate above $2,000 this year, Bennett said.
Meanwhile, a Reuters poll showed the European Central Bank would be more aggressive than previously thought in its tightening campaign, adding another 50 bps to its deposit rate on Feb. 2, as it continued its fight against rampant inflation.
Market participants are also monitoring the news of rising COVID deaths in top gold consumer China.
Among other precious metals, spot silver gained 0.4% to $24.04 per ounce, while platinum fell 0.1% to $1,042.25. Palladium rose 0.9% to $1,742.58.
(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)
By Ashitha Shivaprasad
