Mubasher: Gold prices rose on Tuesday, after hitting a one-week peak ahead of the US Federal Reserve meeting as the dollar fell under the pressure of expectations that signs of economic turbulence would lead policymakers to pause its monetary tightening cycle.

By 8:28 am GMT, spot gold rose 0.20% to 1,248.33 per ounce, while US gold futures went up 0.05% to 1,252.40 per ounce.

Earlier in the session, spot gold reached $1,249 per ounce, its highest level since 11 December.

US dollar index, which measures the greenback against six major currencies, declined 0.17% to 96.9380.

The Federal Open Market Committee (FOMC) is widely expected to raise interest rates at its two-day meeting to be held later in the day, yet the focus would be on its guidance for next year.

“A lot of investors are expecting that the Fed will defer interest rate hikes and may not look to raise them quickly,” Singapore-based dealer GoldSilver Central managing director Brian Lan told Thomson Reuters.

“Investors are hoping gold prices will go up further after the meeting,” Lan said, adding that “$1,251 would be the next level that gold will likely test with support at $1,245.”

Meanwhile, the greenback was fragile in Asian trading as markets expected that growth concerns would prompt the Fed to suggest a halt to its monetary tightening policy at this week’s meeting.

Lower interest rates lower the opportunity cost of holding the non-yielding precious metal, while they pressure the US dollar.

The greenback is still the prime catalyst for gold prices in the meantime, Singapore-based Phillip Futures commodities analyst Benjamin Lu said in a note.

“Though upside potential for gold prices faces impediment from a vigorous dollar, looming economic uncertainties will present optimistic conditions for safe-haven assets beyond 2018,” Lu noted.

In the same vein, gold was supported by a slump in Asian stock markets on Tuesday, while Wall Street shares slid to the lowest level in over a year in the last session.