Gold advances as Powell hints at milder rate hike policy

Gold rose for a second session on Thursday, scaling a one-week peak, buoyed by expectations of a toned-down approach to the Federal Reserve's aggressive monetary tightening cycle.

Spot gold rose 0.4 percent to $1,225.88 per ounce at 13:05 p.m. (1802 GMT), having earlier hit its highest since Nov. 22 at $1,228.96.

U.S. gold futures were up 0.1 percent at $1,225.10.

"Gold is benefiting from Fed Chair Jerome Powell's speech yesterday; so it appears the Fed is close to ending its interest rate hike cycle, giving gold a significant boost," said Phil Streible, senior commodities strategist at RJO Futures in Chicago.

"Geopolitical risk between Russia and Ukraine is going to cause investors to move into the gold market as well. We could see another conflict arise, a much more aggressive one than what we saw previously with Crimea."

Days after Russia seized Ukrainian vessels and their crews near Crimea, the Ukrainian region which Moscow annexed in 2014, German Chancellor Angela Merkel said the West was imposing sanctions on Russia to stand up for international law.

Gold is traditionally viewed as a safe investment during economic and political uncertainty.

However, bullion has largely lost out to the dollar this year as investors sought refuge in the greenback instead when the U.S.-China trade war unfolded against a backdrop of rising interest rates.

Investors are now awaiting the release of the minutes of the U.S. central bank's November meeting for further clarity on the Fed's monetary tightening path.

Gold jumped on Wednesday after Powell said the central bank's policy rate is "just below" estimates of a level that neither brakes nor boosts a healthy U.S. economy.

"That weakened the dollar and at the same time lowered expectations of rate increases for the next couple of years... I believe that's what gave the biggest impetus for gold," said Jeff Klearman, portfolio manager at GraniteShares.

"Along with that, you have the G20. There seem to be expectations of a favourable trade agreement or some sort of agreement with China, which could result in a weaker dollar. So, a combination of these factors have been helping gold prices."

China is hoping for "positive results" in resolving the trade war with the United States at the G20 summit in Argentina, the commerce ministry said on Thursday, ahead of a closely watched meeting of Chinese and U.S. leaders.

Palladium fell 0.7 percent to $1,175.70 per ounce, moving away from a record peak of $1,186.50 scaled earlier in the session.

"As we see it strive towards new highs right now, there is clearly some potential for a short-term pullback and profit-taking from here," Mitsubishi analyst Jonathan Butler said.

Spot silver was steady at $14.31 an ounce. Platinum  dipped 0.3 percent to $818.20, having slipped to a seven-week intraday low of $809.50 on Wednesday.