Gold gains for second day as dollar dips ahead of Fed meet

Gold prices rose for a second straight session on Monday, as the dollar slipped after sombre U.S. data increased chances the Federal Reserve will signal a dovish policy stance at its meeting this week.

Spot gold rose 0.2 percent to $1,303.92 per ounce by 0804 GMT. U.S. gold futures gained 0.1 percent to $1,303.80.

The U.S. Fed will begin its meeting on interest rates on Tuesday, which ends with a news conference on Wednesday.

"The narrative has completely changed. A year or six months back, people were talking about policy normalisation, and now to be accommodative. With the flow of U.S. data we had, it could be quite supportive for gold," said Hitesh Jain, vice president, Yes Securities.

U.S. manufacturing output fell for a second straight month in February and factory activity in New York state hit nearly a two-year low this month, data showed on Friday, underscoring Fed's "patient" stance towards further interest rate increases this year.

Markets currently expect there will be no rate hikes this year, and are even building in bets for a rate cut in 2020.

However, if the Fed indicates a possibility of rate cut this year itself then gold prices could skyrocket, Jain said.

The dollar index slid 0.2 percent, having posted its biggest weekly decline since early December last week.