NEW YORK (Reuters) - Gold rose about 1 percent on Wednesday, shaking off two days of losses, as the dollar edged lower after the release of the minutes from Federal Reserve's July meeting at which policymakers voted unanimously to keep U.S. interest rates unchanged.
Fed policymakers appeared increasingly wary about recent weak inflation data and some called for a halt to further rate hikes until it was clear the trend was transitory, according to the minutes of the central bank's last policy meeting.
Spot gold <XAU=> was up 0.8 percent to $1,281.15 per ounce by 2:49 p.m. EDT (1849 GMT), after rising as much as 1 percent to a session high of $1,283.90.
U.S. gold futures <GCcv1> for December delivery rose 0.3 percent to settle at $1,282.90 an ounce.
Palladium <XPD=> jumped 3.4 percent to a high of $916, its highest since February 2001.
Palladium was helped by a bullish fundamental outlook and broad-based buying across precious metals market due to geopolitical jitters and dovish statements from the Fed, said Bill O'Neill, partner with Logic Advisors in Saddle River, New Jersey.
"Demand for palladium has been strong. The newest cars in places like India and China are driving that. A lot of these markets are about psychology and emotion, like gold. But palladium has strong industrial fundamentals," he said.
The auto industry is by far the largest consumer of the metal.
The dollar <.DXY> weakened against a basket of currencies after the release of the Fed's meeting minutes. [FRX/]
Earlier in the session, the dollar had maintained its strong stance, seeming to shrug off data on Wednesday showing U.S. housing starts and permits were down sharply in July.
Higher interest rates could boost the dollar, making commodities priced in the greenback more expensive for holders of other currencies.
Analysts largely viewed the latest commentary from the Fed as constructive for gold as previously priced in rate hikes are now somewhat in doubt. However, the possibility of a December rate hike may still be a possibility.
"The minutes of the July meeting indicate that many participants still view the recent weakness in consumer prices as transitory, and that most expect inflation to rebound in the coming years," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto.
"Given the still limited concerns surrounding the undershoot of inflation, a few months of healthy price increases over the back half of this year will keep a December rate hike alive."
U.S. Treasury yields, meanwhile, fell to session lows mid-afternoon on Wednesday as U.S. President Donald Trump's disbanding of two CEO advisory panels led Wall Street stocks to pare their earlier gains and increased bids for government debt. [US/]
Gold had rallied after a war of words between Trump and North Korea about Pyongyang's development of nuclear missiles. But in an example of how tensions has subsided in recent days, Trump praised North Korean leader Kim Jong Un on Wednesday for a "wise" decision not to fire missiles towards the U.S. territory of Guam.
"So far we have not seen any positive changes in worries with Russia, North Korea, Venezuela and more political headlines may be coming to support gold prices," said George Gero, managing director at RBC Wealth Management.
Among other precious metals, silver <XAG=> added 2.8 percent at $17.06 per ounce and platinum <XPT=> rose 2.1 percent to $976.60 per ounce.
(Additional reporting by Chris Prentice in New York, Eric Onstad in London, Apeksha Nair and Arpan Varghese in Bengaluru; editing by Adrian Croft and G Crosse)