By Brijesh Patel
(Reuters) - Gold rose on Wednesday after Russian President Vladimir Putin's partial mobilisation announcement re-ignited some safe-haven interest in bullion, although a strong dollar and expected U.S. rate hikes capped gains.
Spot gold was up 0.7% at $1,674.79 per ounce by 1205 GMT. U.S. gold futures rose 0.7% to $1,683.
Putin said he had signed a decree on partial mobilisation beginning on Wednesday, saying he was defending Russian territories and that the West wanted to destroy the country.
"The increased mobilisation, the escalation in that region and fears of escalation in terms of the weapons that are used are factors helping gold to some extent," said independent analyst Ross Norman.
"However, obviously we've got dollar strength... and a widely predicted 75 basis points increase in the Fed funds rate which hasn't helped gold particularly in recent times."
Gold's gains were kept in check as investors also sought refuge in the dollar, which scaled a fresh two-decade high versus a basket of other currencies, making bullion more expensive for overseas buyers. [USD/]
Focus remained on the Fed's policy decision due at 1800 GMT, with traders pricing in an 81% chance of another 75 basis-point rate hike and a 19% probability of a 100 bp increase.
While gold is considered a safe investment during political and financial uncertainties, rising rates dull its appeal since it yields no interest.
"So far, key thresholds haven't proven to be strong supports for gold so if the Fed does surprise with a 100-basis point hike then the price could quickly plunge to a fresh low for the year with the potential for a fall below $1,600," Kinesis Money analyst Rupert Rowling said in a note.
Reflecting sentiment, holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, on Tuesday registered their biggest one-day outflow since July 18.
Spot silver gained 1.1% to $19.52 per ounce, platinum rose 1% to $931.33, and palladium climbed 0.4% to $2,176.83.
(Reporting by Brijesh Patel in Bengaluru; editing by Elaine Hardcastle, Kirsten Donovan)
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