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Gold prices extended gains on Wednesday after the U.S. Federal Reserve’s dovish remarks weakened the dollar against a basket of currencies, yet bullion remained vulnerable to a possible rising greenback and weak investment demand.

In a statement following the end of a two-day policy meeting, the Fed held interest rates steady as expected. The central bank said inflation had “moved close” to its target and that “on a 12-month basis is expected to run near the (policy-setting) Committee’s symmetric 2 percent objective over the medium term.”

The Fed’s rate-setting committee downplayed a recent slowdown in economic and job growth, saying that activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months. “The gold market is seeing this as a little dovish, primarily because some continued to expect the Fed to hike four times this year and the messaging was a little bit soft,” said TD Securities’ Daniel Ghali. Higher interest rates dent the appeal of gold, which earns nothing and costs money to store and insure.

Spot gold was up 0.7 percent at $1,312.14 per ounce by 2:33 p.m. EDT (1833 GMT), while U.S. gold futures for June delivery settled down $1.20, or 0.1 percent, at $1,305.60.

The greenback tipped further below 3-1/2 month highs hit on Tuesday, making dollar-priced gold cheaper for holders of other currencies, which boosted interest. Yet, the U.S. dollar is still expected to strengthen as the euro is expected to weaken, said Walter Pehowich of Dillon Gage Metals. “I think (today’s move) is only temporary. Gold will still continue to be under pressure on the stronger dollar. Gold still has more room to the downside.”

The Fed expressed confidence that a recent rise in inflation to near the U.S. central bank’s target would be sustained, leaving it on track to raise borrowing costs in June. “Rising inflation expectations, an overall bullish commodity trend (late-cycle preference for commodities), geopolitical and financial risks are being offset by a rising dollar and rising real-rates,” Saxo Bank analysts said in a note.

Investors often use gold as a hedge against inflation. But for now, relatively tame commodities prices are “keeping longer term inflation at bay,” and pressuring gold, said Rob Lutts, chief investment officer of Cabot Wealth Management.

Meanwhile, spot silver rose 2.4 percent at $16.50 per ounce and palladium climbed 1.9 percent at $966.90.

Platinum gained 0.7 percent at $896.24 an ounce, earlier dropping to $888, its lowest since Dec. 18.