Gold edges up after gaining on softer dollar

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

Spot gold was up 0.3 per cent at $1,287.01 per ounce by 0340 GMT, after gaining nearly 1 per cent the previous day.

USgold futures for December delivery rose 0.8 per cent to $1,292.80 per ounce.

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"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 USdollar was on the defensive on Thursday after the minutes from the Fed's last policy meeting showed policymakers were increasingly wary of the 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," Schnider said.

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

The UScentral bank is roughly at the mid-point on its current path to normalize 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 $1,294 per ounce, a break above which could lead to a gain to the next resistance at $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 0.9 per cent at $922 after earlier marking it highest since Feb. 2001 at $926.

"Palladium took some inspiration from the more industrially oriented metals," UBS's 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 0.2 per cent at $17.11 per ounce, while platinum eased 0.3 per cent to $974 an ounce.