The precious metal, used in emissions-reducing catalysts for vehicles, is likely to draw strength from a Chinese plan to boost domestic spending on items such as autos and home appliances this year. US-China trade talks ended on Wednesday with a Chinese pledge to buy US goods, Washington said.
"We are getting an idea that there is a potential trade deal between China and the United States and some internal stimulus within China," said Bart Melek, head of commodity strategies at TD Securities. "That ultimately means better consumption of vehicles in China and broadly in the emerging markets," he said, adding that the increased palladium demand comes at a point when the market is already very tight.
Spot gold gained 0.5 percent to $1,291.51 an ounce, while US gold futures settled 0.5 percent higher at $1,292. "It looks like weight has been lifted from the shoulders of the (gold) traders who were concerned about the interest rate hikes," said George Gero, managing director at RBC Wealth Management.
Minutes from the Fed's Dec. 18-19 policy meeting showed some policymakers could be patient about future interest rate increases and a few did not support the central bank's rate hike that month.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar in which gold is priced. Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.03 percent to 796.53 tonnes on Tuesday. The holdings are still around their highest level since August last year. Silver inched 0.1 percent higher to $15.67 per ounce, while platinum rose 0.6 percent to $819.75.