NEW YORK/LONDON (Reuters) - Gold held modest gains on Wednesday, after minutes from the Federal Reserve's September meeting showed several voting policymakers judged an interest rate hike would be warranted "relatively soon" if the U.S. economy continued to improve.
The minutes of the Sept. 20-21 meeting, however, showed the depth of the divide on how much longer they should allow the labour market and inflation to improve before raising rates.
Spot gold XAU= was up 0.2 percent at $1,255.42 an ounce by 2:51 p.m. EDT (1851 GMT), hovering above last week's four-month low at $1,241.20.
U.S. gold futures GCcv1 settled down 0.2 percent at $1,253.80, prior to the release of the minutes.
"Markets seem to be just a bit relieved to find little to suggest that the Fed would be ready to move as early as November which, in truth, would burnish their apolitical bona fides," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
"U.S. Treasury yields are marginally lower which has helped encourage a few value buyers in gold near day's lows."
Higher U.S. rates could boost the U.S. currency which when it rises makes gold more expensive for holders of other currencies.
Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto, saw it differently.
"Now that the warning shot has been fired, as long as the economy continues to post decent results, it appears to be a question of when and not if the FOMC hikes rates before the end of the year, with November now clearly on the table," Mendes said.
Analysts said investors who typically buy gold as a hedge against political and financial uncertainty were shunning it and that was reflected in holdings in physically backed exchange traded funds, which have plateaued overall this week at above 57 million ounces.
"The drying up of safe-haven demand, the risk of profit-taking and the outlook for a stronger U.S. dollar suggest further pressure on prices. The U.S. elections are the wild card to watch," Julius Baer analysts said in a note.
In other precious metals, spot platinum XPT= fell as low as $934.50 an ounce, a six-month low, and later pared gains to fall 0.6 percent at $939.49 an ounce.
Palladium XPD= rose 0.2 percent to $648 after touching $643.22, its lowest since July 19.
"Both markets will register annual deficits for this year and next, but the high level of above ground stocks means that there is no imminent physical tightness," Deutsche Bank said in a note.
Silver XAG= gained 0.6 percent at $17.54.
Additional reporting by Swati Verma in Bengaluru; Editing by Susan Thomas and Chizu Nomiyama