Investing.com - Gold prices rose to nearly a five-month high on Tuesday as a continuing decline in the dollar boosted foreign demand for the precious metal, while investors shift attention to the next Federal Reserve policy meeting.
At 9:49 AM ET (14:49 GMT), gold futures for February delivery on the Comex division of the New York Mercantile Exchange gained $6.20, or 0.50%, to $1,245.50 a troy ounce, after touching $1,247.40 earlier, its highest level since July 11.
Meanwhile, the U.S. U.S. dollar index, which tracks the greenback against a basket of six major currencies, was down 0.36% to 96.623.
Weakness in the American currency increases the appeal of dollar-denominated gold as it becomes more affordable for holders of foreign currencies.
The dollar index rose to the highest levels of the year in early November, supported by a robust U.S. economy and a relatively hawkish Fed, which forecast moving ahead with gradual rate hikes.
But as the Dec. 18-19 monetary policy just over the horizon, the greenback came under pressure last week when the market took comments from Fed Chairman Jerome Powell as signaling a slower pace of rate hikes.
That more dovish tone led markets to question how many times the central bank will hike rates in 2019.
"Given data remains strong, we think the Fed will hike twice in 2019 and that's more than what the market is pricing in right now ... we remain moderately bullish on the dollar," said Nick Twidale, chief operating officer at Rakuten Securities.
Although the Fed’s economic projections pointed to a total of three rate increases next year, policymakers will update the dot-plot that shows their outlook for interest rates at the upcoming meeting.
A slower-than-expected pace of interest rate increases would lessen the pressure on non-yielding bullion.
Powell was scheduled to appear before Congress's Joint Economic Committee on Wednesday, but the testimony was postponed after U.S. President Donald Trump declared a national day of mourning following the death of President George H.W. Bush. The testimony had yet to be rescheduled.
In other metals trading, silver futures advanced 1.30% at $14.688 a troy ounce 9:50 AM ET (14:50 GMT).
Palladium futures gained 0.73% to $1,174.10 an ounce, while sister metal platinum fell 0.93% at $803.15.
In base metals, copper traded down 0.52% to $2.795 a pound.
-- Reuters contributed to this report.