 "Gold again emerging as a safe haven")
Gold advanced to trade near a 13-month high on Tuesday, supported by a struggling dollar and hopes the USFederal Reserve will not raise interest rates as soon as next week's meeting.
The non-interest yielding metal could test $1,300 an ounce, more than 2% higher than its current level, if the Fed stands pat at the March 15-16 policy meeting, said Daniel Ang, analyst at Phillip Futures in Singapore.
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"A lot of traders are trying to anticipate a 'no rate hike' scenario, causing a bit of an increase in gold," said Ang. A shaky global economy and the recent strength in the US dollar, which had curbed US exports, could convince the Fed to hold rates steady, he added.
Spot gold was up 0.2% at $1,269.46 an ounce by 0644 GMT, not far from Friday's peak of $1,279.60, its highest since Feb. 3, 2015.
US gold for April delivery gained 0.5 percent to $1,270.50 an ounce.
The dollar has been struggling to find traction despite a robust US February employment report on Friday, its losses extending this week as a rally in oil prices rekindled demand for the euro and commodity-sensitive currencies.
That has benefited gold along with fairly low market expectations that the Fed will raise interest rates again next week after lifting them for the first time in nearly a decade in December.
Ahead of the meeting, Fed Governor Lael Brainard, who has emerged as a leader of the Fed's dovish faction, argued for "patience" in raising interest rates. But Fed Vice Chair Stanley Fischer warned that inflation is showing signs of accelerating, words that policymakers often use when signalling a preference for raising rates.
Supporting bullion, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped slightly on Friday, but stayed near the highest since September 2014 at 25.5 million ounces.
Goldman Sachs is sticking to a near-term target of $1,100 for gold, saying the rally "was driven by a lack of conviction in divergence in US growth as a weak U.S. dollar has been highly correlated with a higher gold price."
"We believe this realignment view of weak global growth is not supported by the US data, which will likely reinforce higher US yields, a stronger US dollar and the return of divergence...," Goldman said in a report on Tuesday.
Spot silver dropped 0.6 percent to $15.55 an ounce. Spot platinum slipped 0.4% to $995.20 an ounce after hitting a four-month high overnight while palladium fell 1.4% to $566.86, after peaking at $580.56 earlier, its strongest since November.
