By Arpan Varghese
REUTERS - Gold prices edged up on Tuesday as the dollar crept lower, with investors turning their attention to testimony from U.S. Federal Reserve Chair Janet Yellen later in the day for hints on the central bank's interest rate strategy.
Spot gold was up 0.3 percent at $1,228.90 per ounce at 0542 GMT, while U.S. gold futures rose 0.4 percent to $1,230.60.
Investors are focusing on testimony by Yellen before Congress on Tuesday and Wednesday in the wake of hints from other policymakers that could suggest they are leaning towards more hikes in interest rates this year than the two currently priced in by markets.
"The commentary will be keenly followed. Any guide to whether (a rate hike in) March is on the table will be key to moving gold," said ANZ analyst Daniel Hynes.
"I would not expect to see much volatility, don't think anyone is really confident enough to put on any sort of directional trades at the moment until they hear from Yellen."
Dallas Fed President Robert Kaplan on Monday said the U.S. central bank should act soon to raise rates, or risk having to abandon its plan to do so slowly.
Gold is highly-sensitive to climbing U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
The dollar index was down 0.1 percent at 100.840, edging away from Monday's peak of 101.11, its highest since Jan. 20.
Spot gold may test resistance at $1,230 per ounce, a break above which could lead to a gain to $1,235, according to Reuters technical analyst Wang Tao.
"(This) will be a year littered with political and economic minefields and we do not see a scenario where gold will experience a major sell-off back to the late 2016/early 2017 lows," said INTL FCStone analyst Edward Meir.
Political risk from elections in Europe and worries over U.S. President Donald Trump's policies were also seen supporting underlying safe-haven appetite for the metal.
Gold has rallied nearly 10 percent after touching 10-month lows in December, following the Fed's move to raise interest rates.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.49 percent to 840.87 tonnes on Monday.
Spot silver on Tuesday climbed 0.22 percent to $17.83 per ounce. The metal hit its highest since Nov.11 at $18 in the previous session.
Platinum was flat at $995 per ounce.
Palladium was mostly unchanged at $774.38 per ounce. That was down from its highest in over two weeks a $786.90, hit the session before.
(Reporting by Arpan Varghese in Bengaluru; Editing by Joseph Radford)
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