Gold hovers near key $1 800 level as softer dollar lifts appeal

Spot gold was up 0.6% at $1 803.06/oz, as of 08:58 GMT. US gold futures rose 0.4% to $1 802.80.

The dollar index hit a near one-month low, making bullion more appealing to buyers holding other currencies.

At the moment gold is more driven by dollar, and while there's a perception inflation will be transitory, there is a persistent element of pressure, Michael Hewson, chief market analyst at CMC Markets UK said.

"There is a perception that Fed is behind the curve and (will be) forced to act as a consequence of more persistent inflationary pressures," Hewson added.

Gold rallied to its highest level since early-September on Friday before paring gains after Powell said the US central bank should start reducing its asset purchases, but reiterated his view that high inflation will likely abate next year.

Powell also added it is not yet time to begin raising interest rates and will wait for the labour market to heal.

The next FOMC meeting is due on November 2 to 3.

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, translating into a higher opportunity cost for non-yielding bullion.

The dollar has been retreating as markets adjust to the spreading of inflation-related fears across the globe, Ricardo Evangelista, senior analyst at ActivTrades said in a note.

This means the forces that supported the dollar earlier in the year are now propelling other currencies to fresh highs, "a dynamic that penalises the dollar and therefore supports gold."

Market participants now eye the Bank of Japan and the European Central Bank meetings due on Thursday.

Spot silver rose 0.6% to $24.46/oz. Platinum gained 0.3% to $1 043.51 and palladium climbed 1.2% to $2 046.39/oz.