Gold inches up as dollar eases ahead of Fed decision

By Nithin ThomasPrasad

(Reuters) - Gold prices rose on Wednesday from one-week lows hit in the previous session, as the dollar fell against a basket of major currencies and traders awaited the outcome of the U.S. Federal Reserve's two-day meeting.

Spot gold had climbed 0.4 percent to $1,343.51 per ounce by 0738 GMT. In the previous session, it touched its lowest since Jan. 23 at $1,334.10 an ounce.

U.S. gold futures for February delivery rose 0.4 percent to $1,339.80 per ounce.

Gold prices were on track for a third consecutive monthly gain and are up 3.1 percent so far in January, their best month since August, largely due to weakness in the dollar.

"Yellen may deliver a hawkish surprise setting the stage for a possible policy pivot while trumpeting in the Powell era. Gold bears may take advantage of this move," said Stephen Innes, APAC trading head for OANDA.

A rate hike in March would not come as a surprise, but any change in the pace of hikes would pose a risk to gold's rally, Innes noted.

The Fed is expected to leave interest rates unchanged on Wednesday while signalling a gradual tightening of monetary policy later this year as the U.S. economy continues to expand and job gains remain solid.

The dollar inched lower against a basket of major rivals on Wednesday, showing scant reaction to U.S. President Donald Trump's State of the Union address.

"Trump's speech focused on national security and immigration ... that's why gold prices are going up. As for infrastructure (spending), there was nothing special," a Taiwan-based trader said.

Traders were also waiting for the U.S. jobs report on Friday that will include data on nonfarm payrolls and average hourly earnings.

Spot gold is expected to break support at $1,335 per ounce and fall more towards the Jan. 18 low of $1,323.70, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.

In other precious metals, silver climbed 0.4 percent to $17.20 per ounce, after hitting a one-week low of $17.03 earlier in the session.

Palladium was up 0.4 percent at $1,058.74 per ounce, having fallen nearly 3 percent in the previous session to mark a five-week low at $1,047.00.

Platinum gained 0.7 percent to $1,002.90 per ounce. It is up 8.4 percent for the month so far, on track for its best month since January, 2017. It hit a one-week low the session before.

(Reporting by Nithin Prasad and Nallur Sethuraman in Bengaluru; Editing by Richard Pullin and Joseph Radford)