Gold rose Wednesday as the dollar flattened out after the U.S. Federal Reserve held interest rates steady, but hinted that inflation is climbing slowly higher.
Spot gold was up 0.64 percent at $1,311.91 an ounce at 2:21 p.m. ET. U.S. gold futures for June delivery rose 0.5 percent at $1,313.30 an ounce.
Investors often use gold as a hedge against inflation, which erodes wealth. Higher interest rates make gold, which earns nothing and costs money to store and insure, unattractive.
U.S. currency hit a 3-1/2 month high on Tuesday, but pared its gains after the Fed statement Wednesday.
"The dollar's rebound has put pressure on gold and that is likely to persist," said Julius Baer analyst Carsten Menke. "The other problem is a lack of investment demand, which is surprising given the headwinds to global trade from protectionism. You can see it in the physically backed gold products, a primary indicator of safe-haven demand."
At around 28 million ounces, holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust, are down more than 10 percent since the middle of 2016.
Protectionism is a reference to U.S. plans to levy taxes on aluminum and steel imports, which could mean retaliation from places such as China and the European Union.
"Rising inflation expectations, an overall bullish commodity trend (late-cycle preference for commodities), geopolitical and financial risks are being offset by a rising dollar and rising real-rates," Saxo Bank analysts said in a note.
On the technical front, support kicks in around $1,305 where the 200-day moving average sits and resistance at $1,321 near the 100-day moving average.
Elsewhere spot silver rose 1.95 percent to $16.43 per ounce and palladium climbed 1.39 percent to $961.70. Platinum was up 0.49 percent at $894.40 an ounce after hitting $888.50 on Tuesday, its lowest since December.
Platinum is used in autocatalysts, mainly for diesel cars, where demand has been sliding after the Volkswagen emissions scandal.
"Sales of diesel cars in Europe's five biggest markets - Germany, UK, France, Italy and Spain - accounted for 37 percent of the total in April," Menke said. "This is down eight percentage points year-on-year."
