Picture used for illustrative purpose. File

Gold prices rose on Monday helped by a weaker dollar and expectations that the US Federal Reserve will reiterate its dovish monetary policy stance this week.

Spot Gold rose 0.2% to $1,945.56 per ounce by 0918 GMT. US Gold futures rose 0.3% to $1,954.20 per ounce.

"Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting," said Michael Hewson, chief market analyst at CMC Markets UK.

 "If you want to have a policy of average inflation targeting, you're going to have to go into detail as to how you are going to arrive at that particular outcome."

The dollar retreated on Monday, bolstering Gold's appeal for investors holding other currencies, ahead of the Fed's policy decision due on Wednesday.

The central bank is expected to hold rates while elaborating on an earlier announcement of a shift to inflation targeting. 

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"If inflation forecasts remain at 2% or below, this could offer Gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment," said FXTM analyst Lukman Otunuga.

Market participants are also waiting for the Bank of Japan and the Bank of England's policy decisions due on Thursday. Investors also took stock of uncertainty surrounding the UK's Brexit deal, as Prime Minister Boris Johnson's plan breaching parts of the treaty faces vote in parliament later in the day.

Capping Gold's gains, AstraZeneca Plc resumed its phase-3 trial, rekindling hopes for a potential vaccine against COVID-19.

Gold is likely to remain trapped in a range in the near term due to the conflicting forces pulling and tugging at the commodity with major headwinds coming in the form of rising vaccine hopes and positive economic data from major economies, FXTM's Otunuga said.

Silver gained 0.3% at $26.82 per ounce, platinum rose 1.2% to $936.15, while palladium slipped 0.5% to $2,310.00

Reuters