Gold prices rose more than 1pc on Wednesday as weaker-than-expected US data increased prospects for a rate cut by the US Federal Reserve, dragging the dollar lower.
Spot gold was 1.2pc higher at $1,422.20 per ounce at 12:45 p.m. EDT (1645 GMT). US gold futures were up 0.9pc at $1,423.70.
The dollar retreated from a one-week high touched in the previous session, making gold cheaper for investors holding other currencies, after a federal report showed US housing starts fell in June for a second straight month.
"The data shows that the economy is slowing down, the housing market is slowing down and as a result of that the Fed will most likely be aggressive on their stance of cutting rates," said Phillip Streible, senior commodities strategist at RJO Futures.
"If the fed's going to cut rates there is no reason for you to hold dollar so that is why the dollar index is selling off."
US interest rates futures implied traders fully expect the US central bank to cut rates at its policy meeting on July 30-31 with a 35pc chance for a half-point decrease, up from a 28.7pc chance, CME Group's FedWatch tool showed.
Lower rates tend to weigh on the dollar and decrease the opportunity cost of holding non-yielding bullion.
Market participants are awaiting the release of the Fed's Beige Book, a summary of economic conditions across the United States at 2 p.m eastern US time (1800 GMT) for direction on interest rates.
Gold has also been supported by concerns over global growth, exacerbated by data on Monday pointing to a slowdown in the Chinese economy, analysts said.
"Gold remains locked within the $1,400-$1,420 range, while more broadly, we look for a move outside of $1,380-$1,440 for medium-term direction," MKS PAMP said in a note.
Silver rose about 2.2pc to $15.89 per ounce, extending gains for a fourth straight session. It touched a more than four-month high of $15.92 earlier in the session.
"Silver Exchange Traded Funds have continued to register substantial inflows in recent days - inflows since the start of the month have exceeded 600 tons," Commerzbank wrote in a note.
"It appears that the pronounced ETF inflows are gradually having an impact after all."
Platinum rose 1pc to $$846.65 per ounce, trading close to a two-month peak it hit on Tuesday, while palladium also gained 1pc to $1,540.55.
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