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Gold edges up on softer dollar, palladium at 16-year peak

[BENGALURU] Gold rose on Thursday as the dollar remained subdued after minutes from the US Federal Reserve's July meeting hinted at a delay in further rate hikes, while palladium hit a fresh 16-year high.

Spot gold was up 0.4 per cent at US$1,287.90 per ounce by 0700 GMT, after gaining nearly 1 per cent the previous day.

US gold futures for December delivery rose 0.8 per cent to US$1,293.70 per ounce.

"It's a dollar story and a concern that the market's been having with regards to geopolitical events," said Dominic Schnider at UBS Wealth Management in Hong Kong.

The US dollar was on the defensive on Thursday after the minutes from the Fed's last policy meeting showed policymakers were increasingly wary of recent softness in inflation and some called for halting interest rate hikes until it was clear the trend was transitory.

"The market believes at the moment that there's not much inflation and the Fed need not do much," Mr Schnider said.

"We disagree, and believe the Fed will in September come with a balance sheet reduction and hike rates in December."

The US central bank is roughly at the mid-point on its current path to normalise interest rates as the economy has shown further improvement even without fiscal stimulus, San Francisco Federal Reserve President John Williams told CNN television on Wednesday.

Higher interest rates could boost the dollar, making commodities priced in the greenback more expensive for holders of other currencies.

Spot gold may test a resistance at US$1,294 per ounce, a break above which could lead to a gain to the next resistance at US$1,304, Reuters technical analyst Wang Tao said.

"In the shorter term, and in the absence of any geopolitical headlines, traders should watch the performance of the dollar against its G-10 peers for clues to gold's short term direction," said Jeffrey Halley, a senior market analyst at OANDA.

Meanwhile, palladium was up 0.7 per cent at US$920.48 after earlier marking it highest since Feb 2001 at US$927.80.

"Palladium took some inspiration from the more industrially oriented metals," UBS's Mr Schnider said, pointing to a broad based rally that has pushed the prices of aluminium, copper and zinc to multi-year peaks.

The auto industry is by far the largest consumer of the palladium.

Among other precious metals, silver was up 0.3 per cent at US$17.13 per ounce, while platinum was unchanged at US$976 an ounce.