PRECIOUS-Gold gains as dollar weakens after Fed's interest rate cut

* Dollar index declines to over one-week low
* U.S. Fed cuts interest rates, signals it is on hold
* Palladium rises for the third consecutive month

(Updates prices)
By Diptendu Lahiri
Oct 31 (Reuters) - Gold prices climbed on Thursday as the
U.S. dollar weakened after the Federal Reserve cut interest
rates for the third time this year, but signalled the
monetary-easing cycle would be paused.
Hopes that the United States and China will sign a
preliminary agreement and call a truce to their 16-month trade
war was also a factor behind the Fed's decision to signal that
further rate cuts are on hold.
Spot gold XAU= was up 0.3% at $1,500.30 per ounce as of
0854 GMT. Prices have risen nearly 2% this month.
U.S. gold futures GCcv1 rose 0.2% to $1,502.50 per ounce.
"We took this step to help keep the economy strong in the
face of global developments and to provide some insurance
against ongoing risks," Fed Chair Jerome Powell said.
Powell ticked off an extensive list of reasons why he feels
the economy is doing well, and likely to continue to do so under
the current stance of monetary policy - from robust consumer
spending, strengthening home sales, and asset prices he
considered healthy but not to a level of excess.
"Gold might not hold its current upside in the short run as
it is likely to suffer a little as some recent economic data
showed modest growth in the economy," said Michael McCarthy,
chief market strategist at CMC Markets, attributing the present
rise in gold prices to a weaker dollar after Fed's rate cut.
The dollar index .DXY against a basket of six major
currencies dipped 0.3% to 97.36, making gold cheaper for holders
of other currencies. USD/
"A rise in inflation might be the next catalyst for gold
buying in the short run, as the Fed is more likely to tighten
with a higher inflation rate, making some investors hedge
against it (inflation)," McCarthy added.
Asian shares cheered the rate cut and U.S. stock futures
edged higher, with MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS gaining 0.2%. MKTS/GLOB
"While buoyed by a weaker dollar, if equities continue to
outperform, it's challenging to see gold move above the $1,510
critical primary resistance level," AxiTrader market strategist
Stephen Innes said in a note.
Among other metals, palladium XPD= gained slightly to
$1,807.68, after jumping nearly 2% in the previous session, and
was set to climb for a third consecutive month.
Silver XAG= edged up 0.8% to $18.01 an ounce, while
platinum XPT= advanced 0.2% to $928.36 an ounce.