London (Reuters) - Gold rose above $930 per ounce on Wednesday, gathering strength as the dollar prolonged its downward slide against major currencies on expectations that the U.S. Federal Reserve will not rush to raise interest rates.
The metal extended its gains in London after hitting a six-week low of $912.90 on Monday, with the dollar retreating further against major rivals -- making bullion and other commodities priced in the U.S. currency more appealing to non-U.S. investors.
Spot gold rose to $929.60 an ounce by 1019 GMT (6:19 a.m. EDT), up almost half a percent from $925.15 quoted late in New York on Tuesday. It earlier hit a high of $930.35.
The Fed is expected to emphasize that the U.S. economy remains in a vulnerable position, despite some reassuring signs, when it publishes its post-meeting statement later on Wednesday.
Analysts said that short-covering would probably boost bullion, while gathering uncertainty about the pace of global economic recovery was also supportive to its role as a hedge against such jitters.
"The weaker dollar is helping today,...and people are becoming more nervous about the state of the financial landscape," said Robin Bhar, an analyst at Calyon.
"There was a feeling that the Fed would have to tighten (rates) a lot sooner, but investors are perhaps reassessing their view of the timing of rate increases. And that, of course, would help gold," he added.
Higher U.S. borrowing costs traditionally raise the allure of U.S. assets including the dollar, thus pressuring gold.
INFLATION WORRIES RECEDE
In other precious metals, spot silver firmed to $13.93, up slightly from $13.82 quoted late in New York on Tuesday, while platinum rose to $1,167.50 from $1,158 and palladium gained to $237.00 from $233.50.
Inflation expectations also receded after the chief economist of the International Monetary Fund said that the recent rebound in oil prices had been largely driven by speculators without support from real demand.
Oil was down 54 cents at $68.70 per barrel.
U.S. gold futures for August delivery rose more than half a percent to $929.80 per ounce since Tuesday's settlement.
Investor interest in gold-backed exchange-traded funds, which are designed to closely reflect the price of an underlying market such as gold, has fallen recently as gold retreated from a three-month high of $989 per ounce in early June.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings were 1,131.24 tonnes on June 23, unchanged from the previous business day. The holdings are down 0.2 percent from the record high of 1,134.03 tonnes reported on June 1.
