Gold retained gains from a two-day rally on Wednesday to trade near its highest in three weeks as more soft US economic data hurt the dollar and lowered expectations for a Federal Reserve rate hike in June.
Spot gold was steady at $1,210 an ounce by 0325 GMT, after gaining nearly 3 per cent in the last two sessions.
The metal had climbed to $1,215 on Tuesday, its highest since April 7. Bullion has been boosted in recent days after a string of data, including US consumer confidence data released on Tuesday, hinted at slowing momentum in the US economy.
The data, ahead of a statement from the Federal Open Market Committee (FOMC) due on Wednesday after its two-day policy meet, sparked expectations the US central bank would delay an interest rate hike to later this year.
"The statement is expected to be dovish," ANZ analysts said in a note.
"Since the FOMC last met in mid-March, US data have been mostly soft, confirming the weak start to the year."
Gold could see greater volatility ahead of the statement, the analysts said. Investors will also get an early read of how the U.S. economy fared in the first quarter with GDP data due to be released just hours before the Fed statement.
A dovish statement is likely to hurt the dollar further and would be another boost for gold.
"We think that the dollar sell-off has more room to go, especially as this week's slew of numbers get rolled out, showing a marked slowdown in recent economic activity," said INTL FCStone analyst Edward Meir.
A soft dollar along with technical buying and lingering short-covering will push gold prices higher, Meir said.
The dollar was wallowing at two-month lows against a basket of major currencies on Wednesday.
A softer dollar increases bullion's appeal as a haven, while lower rates also lend support to non-interest-paying gold. The higher prices, however, have dampened physical demand.
In China, the second biggest gold consumer, premiums eased to about $1 an ounce on Wednesday over the global benchmark, from $2-$3 in the previous session.
Other data this week on China have also not been encouraging. China's gold imports from Hong Kong dipped to their lowest level in seven months in March.
Weak demand for jewellery, coins and bars in the key Chinese market helped drive a 9 percent fall in global physical gold buying in the first quarter, an industry report showed.
