Gold prices edged up on Wednesday after hitting a one-week low in the previous session, with the dollar falling against a basket of major rivals and traders awaiting the outcome of the US Federal Reserve’s two-day meeting.

Spot gold had risen 0.2 per cent to $1,341.15 per ounce by 0359 GM. In the previous session, it had touched its lowest since January 23 at $1,334.10 an ounce. US gold futures for February delivery rose 0.4 per cent to $1,339.80 per ounce.

“Yellen may deliver a hawkish surprise setting the stage for a possible policy pivot while trumpeting in the Powell era. Gold bears may take advantage of this move,” said Stephen Innes, APAC trading head for OANDA.

A rate hike in March would not come as a surprise, but any change in the pace of hikes would pose a risk to gold's rally, Innes noted.

Dollar remains weak

Gold prices have risen 2.8 per cent so far in January, their best month since August, largely due to weakness in the dollar. The dollar inched lower against a basket of major rivals on Wednesday, showing scant reaction to US President Donald Trump’s State of the Union address.

US Treasury yields

The greenback failed to draw much support from higher Treasury yields as the risk-averse mood favoured its peers like the yen. Traders also awaited US jobs report on Friday that will include data on non-farm payrolls and average hourly earnings.

Spot gold is expected to break support at $1,335 per ounce and fall more towards the January 18 low of $1,323.70, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.

In other precious metals, silver climbed 0.3 per cent higher to $17.17 per ounce after hitting a one-week low of $17.03 an ounce earlier in the session. Palladium was up 0.3 per cent at $1,057.45 per ounce, after hitting a five-week low at $1,047.00 in the previous session.

Platinum gained 0.3 per cent to $999.30 per ounce, after falling for four straight sessions. It hit a one-week low the session before.