PRECIOUS-Gold firms as dollar loses ground ahead of Trump inauguration

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Donald Trump takes office at noon ET (1700 GMT)

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Goldman Sachs raises central bank gold demand forecast

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Fed to hold rates steady in Jan, resume cutting in March- poll

(Adds graphic, updates with mid-session trading)

By Rahul Paswan

Jan 20 (Reuters) - Gold firmed on Monday on a softer dollar as investors awaited Donald Trump's inauguration speech later in the day for insights into his policies that are expected to provide clarity on the inflation outlook and Federal Reserve's future rate decisions.

Spot gold was up 0.3% at $2,711.29 per ounce, as of 0659 GMT, after falling 0.5% earlier in the day. U.S. gold futures added 0.1% to $2,752.40.

The dollar index was on the defensive at the start of a pivotal week as Trump returns to the White House and is due to assume the presidency at noon ET (1700 GMT). A weaker dollar makes bullion more attractive to foreign buyers.

"If we happened to hear a more conciliatory or softer tone from President Trump regarding trade and tariff policies, this could alleviate inflationary concerns, which may see the U.S. dollar and Treasury yields recede, and gold is potentially one asset that could benefit from this scenario," said Tim Waterer, chief market analyst at KCM Trade.

Gold is used as an inflation hedge, but higher interest rates dampen its appeal.

Trump's broad trade tariff policies are expected to further ignite inflation, potentially increasing bullion's safe-haven appeal.

"Gold's status as a financial asset makes it likely exempt from broad-based tariffs, and we therefore assign a 10% probability to a 10% effective tariff on gold being introduced within the next 12 months," Goldman Sachs said in a note.

The bank earlier raised its central bank gold demand forecast, but kept its long-term bullion price prediction unchanged at $3,000 per ounce by mid-2026 on expectation of fewer interest rate cuts in 2025.

According to a slim majority of economists polled by Reuters, the Fed will likely hold interest rates steady on Jan. 29 and resume cutting in March.

Spot silver gained 0.2% to $30.39 per ounce, palladium rose 0.2% to $949.05. Platinum fell 0.4% to $938.93.

(Reporting by Rahul Paswan in Bengaluru; additional reporting by Swati Verma; Editing by Subhranshu Sahu)