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Gold prices rose more than 1% on Wednesday, following a retreat in the dollar, as investors waited to see whether the Federal Reserve would opt for one of the sharpest U.S. rate hikes since 1994.

Spot gold rose 0.7% to $1,820.69 per ounce by 10:49 a.m. EDT (1449 GMT), while U.S. gold futures gained 0.6% to $1,823.40.

The dollar is trading marginally lower, boosting gold ahead of the Fed's rate decision, DailyFX analyst Warren Venketas said.

The policy decision is due at 2 p.m. EDT (1800 GMT), with many traders, according to CME's FedWatch Tool, pricing in a 75 basis point hike from the Fed. [FEDWATCH]

The dollar index was 0.3% lower, making gold cheaper for overseas buyers, while Treasury yields also dipped. [USD/] [US/]

Uncertainty regarding the outcome of Wednesday's FOMC meeting is also prompting some buying interest in safe-haven metals, said Jim Wyckoff, senior analyst at Kitco Metals.

Although gold is considered a hedge against inflation, rate hikes increase the opportunity cost of holding non-yielding bullion.

With markets participants nearly fully pricing in two consecutive 75 bp hikes, "gold and risk markets alike could be set up for a short-squeeze," TD Securities said in a note.

Investors also took stock of data showing an unexpected fall in U.S. retail sales in May amid record high gasoline prices.

Meanwhile, Goldman Sachs said a "wealth shock" due to lockdowns in China merely delayed rather than derailed its upside view for bullion.

A rebound in emerging market demand, strong ETF inflows, central bank buying amid U.S. growth weakness into 2023 all augur well for gold, the bank said, projecting a three-month price target of $2,100 an ounce.

Spot silver rose 1.8% to $21.46 per ounce, while platinum was up 1.3% to $932.60. Palladium was 1.8% higher at $1,847.84 per ounce.