LONDON (Reuters) - Gold edged higher on Wednesday after the Bank of Japan adopted a target for long-term interest rates, and further gains are expected if the U.S. central bank holds back from a rate increase.
Gold climbed along with stock markets after the Bank of Japan overhauled its monetary policy framework, switching to targetting interest rates and sidelining more than three years of massive money printing.
"It provided a bit of a lift to gold as well as well as other assets, but certainly we are going to be more or less on hold until we see the Fed statement later," analyst Tom Kendall at ICBC Standard Bank in London said.
The U.S. Federal Reserve is expected to keep interest rates unchanged later on Wednesday amid tepid inflation and recent weak economic data, but could signal an increased likelihood of an increase by the end of the year.
"My view is we're certainly not going to see any rate increase from the Fed, and any shift in the language is going to be fairly minor, so although they'll be some volatility around the release, my guess is we'll see gold end higher rather than lower."
Spot gold was up 0.4 percent at $1,319.72 an ounce by 0915 GMT. U.S. gold futures climbed 0.4 percent to $1,323.10 an ounce.
Fed Chair Janet Yellen is scheduled to conclude the U.S. central bank's meeting with a news conference later on Wednesday.
One analyst said gold could be pressured since Yellen is expected to prepare the market for a December hike.
"Against the backdrop of prevailing bullish sentiment in the gold futures market and fading safe-haven demand, prices should come under pressure again and move below $1,300 per ounce," analyst Carsten Menke at Julius Baer in Switzerland said.
"This is not least due to the fact that Asian gold demand remains very weak."
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, slid 0.41 percent to 938.75 tonnes on Tuesday. [GOL/ETF]
The dollar index, which measures the currency against six major currencies, pared gains and a touch weaker at 95.990 after rising as much as 0.3 percent. [USD/]
Spot gold remains neutral in a range of $1,313-$1,319 per ounce, and only an escape from this zone could give it a direction, according to Reuters technical analyst Wang Tao.
Spot silver edged up 0.8 percent to $19.42 an ounce.
Platinum climbed 1.3 percent to $1,039.30 and palladium rose 0.7 percent to $685.80.
(Additional reporting by Swati Verma and Nallur Sethuraman in Bengaluru. Editing by Jane Merriman)