PRECIOUS-Gold near 3-month high on softer dollar, Trump policy uncertainty

Updates with mid-session trading

By Daksh Grover

Jan 22 (Reuters) - Prices of safe-haven gold rose to a near three-month high on Wednesday, boosted by uncertainty surrounding U.S. President Trump's policies and a softer dollar.

Spot gold XAU= added 0.4% to $2,755.19 per ounce as of 1200 GMT. The price hit its highest level in 12 weeks earlier in the session and is close to its record peak of $2,790.15 reached in October.

U.S. gold futures GCcv1 gained 0.3% to $2,766.80.

Spot silver XAG= fell 0.1% to $30.8201, hovering near a one-month high hit on Jan. 16.

The dollar index .DXY dipped to over a three-week low earlier in the session. A weaker dollar makes gold more attractive for holders of other currencies.

"Gold and silver prices have both benefited from the increased uncertainty caused by Trump announcements, including tariffs, with investors also evaluating their inflationary impact and effects on monetary policies," said Ole Hansen, head of commodity strategy at Saxo Bank.

"In the coming days and weeks, the precious metal market will be held hostage to the ebb and flow of news from Washington."

Trump vowed to impose tariffs on the European Union and said his administration was considering a 10% tariff on Chinese imports due to fentanyl being trafficked from China to the United States via Mexico and Canada.

Gold's appeal as an inflation hedge may decline if Trump's policies that analysts see as inflationary prompt the Federal Reserve to keep interest rates higher for longer, as bullion is a non-yielding asset.

A slim majority of economists polled by Reuters expect the U.S. central bank to hold rates steady on Jan. 29.

"Central bank purchases set a strong demand base (for gold), but we expect investment demand to lift, offsetting losses in physical demand," ANZ said in a note.

Platinum XPT= was flat at $944 and palladium XPD= added 0.1% to $962.61.

(Reporting by Daksh Grover in Bengaluru; Additional Reporting by Sarah S Qureshi in Bengaluru; Editing by Janane Venkatraman and Emelia Sithole-Matarise)

((Daksh.Grover@thomsonreuters.com;))