By Nithin ThomasPrasad
(Reuters) - Gold prices were flat on Wednesday, hovering near a one-week high on a weaker dollar following U.S. Secretary of State Rex Tillerson's sudden dismissal, which invigorated concerns of protectionist policies hampering global risk appetite.
Spot gold was unchanged at $1,325.93 per ounce at 0735 GMT. It touched $1,330.02 an ounce during the session, its highest since March 7.
U.S. gold futures for April delivery fell 0.1 percent to $1,326.30 per ounce.
On Tuesday, President Donald Trump fired Tillerson after a series of public rifts over policy on North Korea, Russia and Iran, replacing his chief diplomat with loyalist CIA Director Mike Pompeo.
Risk aversion is back on the table following the unexpected news of Tillerson's dismissal and the appointment of Pompeo, said OCBC analyst Barnabas Gan.
"Pompeo is a supporter of Trump's trade policy and could help advance his agenda of imposing it on U.S. trading partners ... all this uncertainty and risk aversion leaves gold as a safe haven option," Gan added.
The U.S. dollar wallowed against the yen and other major currencies after the dismissal of Tillerson. This killed off an earlier bounce in the currency.
A weaker dollar makes bullion, which is used as an alternative investment during times of political and financial uncertainty, cheaper for holders of other currencies.
"With the U.S. protectionist rhetoric likely to ring equity market alarm bells, gold should continue to be an ideal hedge in this highly unpredictable environment," said Stephen Innes, APAC trading head at OANDA.
Asian shares eased on Wednesday amid fears of rising U.S. protectionism.
Meanwhile, data on Tuesday showed U.S. consumer prices cooled in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pickup in inflation probably will be only gradual.
Inflation is a key economic factor the U.S. central bank considers when deciding monetary policy. A strong U.S. inflation reading could raise expectations for future interest rate increases, which would put pressure on non-yielding bullion.
"The 0.2 percent increase in consumer price index suggests it won't be enough to spur more rate hikes by the Fed than already expected," ANZ analysts said in a note.
Spot gold may rise to $1,334 per ounce, as it has cleared a resistance at $1,327, according to Reuters Technical analyst Wang Tao.
In other precious metals, silver rose 0.42 percent to $16.61 per ounce.
Platinum gained 0.7 percent to $968.40 per ounce and Palladium edged 0.2 percent higher to $992.95 per ounce.
(Reporting by Nithin Prasad in Bengaluru; Editing by Joseph Radford and Gopakumar Warrier)