Gold gains as dollar weakens after cautious Fed speech

Gold prices rose as much as 1 percent from two-week lows as the dollar fell after Federal Reserve Chairman Jerome Powell offered little clues on the pace of future interest rate hikes in a cautious speech.

Meanwhile, palladium prices hit a fresh record high at $1,186.30 per ounce.

While there was "a great deal to like" about U.S. prospects, the bank's gradual interest-rate hikes are meant to balance risks as it tries to keep the economy on track, Powell said, adding that the interest rates were 'just below' neutral estimates.

"Powell's comments suggest that 2019 may be more of a wait-and-see approach and the assumption of any hikes may be premature," said Tai Wong, head of metals trading at BMO.

Spot gold was up 0.7 percent at $1,222.81 per ounce at 1:50 p.m. EST (1850 GMT) after rising as much as 1 percent to $1,226.24. Prices fell to its lowest level since Nov. 15 at $1,210.65 earlier in the session.

U.S. gold futures settled up $10.20, or 0.8 percent, at $1,223.60.

"The buzz word (in Powell's speech) seems to be we are 'just below' neutral status regarding rate increases," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.

"So, with a December rate hike and one or two more in 2019 that should be enough to put the Fed where they want to be."

Higher interest rates tend to boost the dollar, making gold more expensive for holders of other currencies.

Investors will also keep a close watch for the minutes from the central bank's Nov. 7-8 meeting, due on Thursday, for indications on the rate hike trajectory in 2019.

The Fed has raised rates three times this year.

The dollar index, which measures the greenback against a basket of currencies, was down 0.6 percent after the Fed speech.

Meanwhile, U.S. President Donald Trump is likely to meet his Chinese counterpart on the sidelines of the G20 meeting later this week to discuss the trade dispute between the major economies.

Bullion has largely lost out to the dollar as a safe haven asset this year as the U.S.-China trade war unfolded against a backdrop of rising U.S. interest rates.

Palladium was up nearly 3 percent at $1,183.25 per ounce, after hitting the record high.

"The market remains very tight. ... Potential growth for supply is very limited and demand remains robust even though we've seen a decline in auto sales in China and a slowdown in car sales in the U.S.," said Suki Cooper, precious metals analyst at Standard Chartered Bank.

Silver rose 1.4 percent to $14.33 per ounce, while platinum fell 1.1 percent to $820.50, having earlier touched its lowest in more than a month, at $809.50.