Gold prices rose on Wednesday, moving away from a one-week low touched in the previous session, as escalating tensions in the West Asia drove investors towards the safe-haven metal, while a stronger dollar limited the metal's gain.

Spot gold was up 0.3 per cent at $1,420.65 per ounce as of 0353 GMT, after hitting its lowest since July 17 at $1,413.80 in the previous session. US gold futures were steady at $1,421.30 an ounce.

“We have geopolitical tensions in Iran, and also we remain very cautious and sceptical about the (U.S.-China) trade negotiations expected to begin next Monday, because plenty of things remain unsolved between the two nations,” said Margaret Yang Yan, a market analyst at CMC Markets. “On the other side, the dollar index is rallying which is having a negative impact on gold prices.”

Uncertainty in the West Asia continued as a US Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, but did not see the drone go into the water, the US military said on Tuesday. On the trade front, a report said US Trade Representative Robert Lighthizer would travel to Shanghai next week for meetings with Chinese officials to hammer out a deal to end the long-drawn trade tussle between the world's top two economies.

The dollar extended gains to a five-week high, making gold expensive for holders of other currencies. The European Central Bank is likely to at least offer a nod to easier policy at its meeting on Thursday, while the US central bank is widely expected to lower interest rate at its meeting ending July 31.

Futures remain 100 per cent priced for a rate cut of 25 basis points (bps) from the Federal Reserve next week, and ven imply an 18 per cent chance of 50 basis points. “If the Fed does a 25 bp rate cut next week, I don't think gold prices will feel any stronger as it has been already priced in,” said Howie Lee, economist, OCBC Bank. “But if the Fed surprises with a 50 bp cut, that might push gold prices to test the $1,450 level.”

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.25 per cent from Monday to 823.13 tonnes on Tuesday. Spot gold looks neutral in a narrow range of $1,412-$1,427 per ounce, and an escape from the range could suggest a direction, said Reuters technical analyst Wang Tao.

Among other precious metals, silver rose 0.3 per centto $16.45 per ounce. Platinum gained 0.5 per cent to $858 an ounce, while palladium eased 0.3 per cent at $1,522.01.

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