BENGALURU- Gold rose on Thursday after Federal Reserve Chair Jerome Powell's comments boosted perception the central bank would go slow on interest rate hikes next year, while palladium was trading at record levels due to a shortage in supply.
Spot gold was up 0.3 percent at $1,224.86 per ounce at 1130 GMT. U.S. gold futures were steady at $1,224.1 per ounce.
"The hint from the Fed that they are closer to ending the current rate hike cycle caught the markets somewhat by surprise. We saw a good lift up in gold price close to the highs we've seen over the past few weeks," Mitsubishi analyst Jonathan Butler said.
"Treasury yields and dollar dropped back, and that was quite supportive of gold," he said.
Higher interest rates increase bond yields and tend to make non-yielding bullion less attractive. They also tend to boost the dollar, in which gold is priced.
Gold prices jumped as much as 1 percent after Powell's speech on Wednesday, recovering from a two-week low of $1,210.65 hit earlier.
But gains in the precious metal were limited as Powell's dovish tone helped revive risk appetite, driving world stocks to their highest in more than two weeks, while the dollar and bond yields fell.
Powell said the central bank's policy rate is now "just below" estimates of a level that neither brakes nor boosts a healthy U.S. economy.
"Gold was revitalised by Powell's speech and his dovish tone ... Despite this move, we are still in a lateral phase. We could have a first positive signal if bullion surpasses $1,235, paving the way for further rallies," ActivTrades chief analyst Carlo Alberto De Casa wrote in a note.
Investors are now awaiting the release of the minutes of the U.S. central bank's November meeting for further clues on the Fed's monetary tightening path.
Palladium was down 0.1 percent at $1,182.50 per ounce, after earlier hitting a record high of $1,186.50.
"This is a very fundamental story of demand outstripping the supply. It's been six or seven years of sustained market deficit, which has kept the market exceedingly tight," Mitsubishi's Butler said.
"As we see it strive towards new highs right now, there is clearly some potential for a short-term pull back," he said.
Spot silver was down 0.2 percent to $14.29 per ounce. Platinum rose 0.2 percent to $823 per ounce after falling to a seven-week low of $809.50 on Wednesday.