Gold rises as dollar dips before Fed minutes

By Renita D. Young and Peter Hobson

NEW YORK/LONDON (Reuters) - Gold prices rose on Wednesday as weaker-than-expected U.S. data pushed the dollar lower before the release of minutes from the latest Federal Reserve meeting that could hint at the pace of future interest rate rises.

The minutes, to be published at 2 p.m. EST (1900 GMT), come after outgoing Fed Chair Janet Yellen said rates should rise gradually, but warned she was "very uncertain" that inflation would soon rebound, suggesting a cautious approach to rate increases.

The dollar dipped after data showed new orders for key U.S.-made capital goods unexpectedly declined in October. U.S. Treasury bond yields also fell [FRX/] [US/]

Gold is sensitive to rising rates because they tend to boost the dollar, making gold more expensive for holders of other currencies, and push up bond yields, reducing the appeal of non-yielding gold.

Spot gold was up 0.9 percent at $1,292.32 an ounce by 1:38 p.m. EST (1838 GMT), while U.S. gold futures for December delivery settled up $10.50, or 0.8 percent, at $1,292.20 per ounce.

Gold has benefited from a flattening in the U.S. Treasury yield curve that has supported the Japanese yen and pushed the dollar lower, Saxo Bank analyst Ole Hansen said.

The U.S. yield curve hit the flattest in a decade on Tuesday on expectations that the Fed will raise rates, inflation will remain low, and government will increase debt issuance in short- and intermediate-dated maturities while delaying big increases at longer dates. [US/]

"I think we'll see a steeper curve next year. Firmer core inflation readings in the year ahead should push the 10-year Treasury yield higher," said Nick Exarhos, senior economist at CIBC World Markets in Toronto.

Gold has been stuck in a range since early October, because of competing pressure and support sources, traders said.

Investors were keen to own gold to hedge against risks including a fall in global stock markets from current record highs, Hansen added, predicting gold would rise to $1,325 by the end of the year. {MKTS/GLOB]

However, rising U.S. interest rates through next year were likely to strengthen the dollar and put pressure on gold, said Julius Baer analyst Carsten Menke.

On the technical side, gold broke through resistance at the 50-day moving average around $1,286 and the next hurdle was at a Fibonacci level of $1,295.40, analysts at ScotiaMocatta said in a note.

Silver was up 1 percent at $17.11 an ounce.

Platinum was 0.4 percent at $936.60 an ounce and palladium was up 0.5 percent at $1,003.40 after touching $1,007.20, its highest since Nov. 10.

(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Andrew Heavens and James Dalgleish)