Gold Comes Off One-month Low on Dollar Pause; Hawkish Fed Caps Gains

• Fed and BoC keep interest rates on hold amid inflation concerns
• Trump considers deploying troops to Middle East
• Oil rises over $110 a barrel after Iran strikes Middle East energy facilities
• Gold fell 3.7% in the previous session

By Noel John

March 19 (Reuters) - Gold rose on Thursday after briefly touching a more than one-month low, as a pause in the U.S. dollar rally offered support, but gains were capped by a hawkish Federal Reserve, which limited hopes for near-term rate cuts.

Spot gold XAU= added 0.7% to $4,851.43 per ounce as of 0433 GMT, after falling to its lowest since February 6 earlier in the day. Prices fell 3.7% on Wednesday.

U.S. gold futures GCcv1 for April delivery shed 0.9% to $4,852.70.

"The dollar's momentum has paused today, which has effectively allowed gold to start recouping ground, albeit at a modest pace," said Tim Waterer, KCM Trade chief market analyst.

The pause made greenback-priced bullion cheaper for holders of other currencies. USD/

"Expectations for incoming U.S. rate cuts have been a cornerstone of gold's ascent, but spiking oil prices have dampened hopes for monetary easing, which has somewhat pulled the rug out from under the gold price," said Waterer.

Oil climbed above $110 a barrel after Iran attacked several energy facilities across the Middle East following a strike on its South Pars gas field, adding fresh inflation concerns. O/R

The closure of the Strait of Hormuz kept crude elevated, raising transport and manufacturing costs. While a rising inflation backdrop typically boosts gold's appeal as a hedge, high interest rates reduce demand for the non-yielding metal.

The U.S. Federal Reserve and Bank of Canada both struck hawkish tones on Wednesday as surging energy prices arising from the Iran conflict clouded the inflation outlook.

Both central banks held rates steady, but warned of risks that rising energy costs could fan a more persistent inflation spike.

Meanwhile, U.S. President Donald Trump's administration is considering deploying thousands of U.S. troops to reinforce operations in the Middle East.

Spot gold has fallen more than 9% since the U.S.-Israeli strike on Iran on February 28, pressured by a stronger dollar, which has emerged as one of the clearest "safe-haven" winners.

Spot silver XAG= gained 0.4% to $75.63 per ounce. Spot platinum XPT= rose 0.7% to $2,036.67 and palladium XPD= added 1.8% to $1,501.37.

Dollar vs Gold