Gold prices rose on Thursday on a softer dollar, while investors braced for a host of U.S. economic data ahead of a crucial Federal Reserve's policy meeting next week.

Spot gold rose 0.4% to $1,996.50 per ounce by 0230 GMT, while U.S. gold futures climbed 0.5% to $2,005.20.

Making bullion less expensive for other currencies holders, the dollar index eased 0.1% on the day.

Gold is treading waters right now, as investors keep an eye on U.S. debt ceiling talks, and the Fed meeting next, that could offer some ideas on what to expect for the rest of the year, said Edward Meir, a metals analyst at Marex.

The U.S. House of Representatives on Wednesday narrowly passed a bill to raise the government's $31.4 trillion debt ceiling.

Meanwhile, First Republic Bank's market value plunged again on Wednesday as investors waited to see if it would be able to find buyers for assets and engineer a turnaround without government support.

Therefore, given the "uneasy tone with the banking situation" and the "debt ceiling uncertainties, gold will probably be more sensitive to the upside than to the downside," Meir said.

Safe-haven gold scaled an over one-year peak at $2,048.71 mid-April as the banking crisis unfolded and weak U.S. economic readings bolstered bets for a pause in interest rate hikes.

Lower rates lift the appeal of zero-yield gold.

Traders will now scan the U.S. quarterly GDP figures and weekly jobless claims due at 1230 GMT, after data on Wednesday showed new orders for key U.S.-manufactured capital goods fell more than expected in March, while shipments declined, suggesting business spending on equipment was likely a drag on economic growth in first quarter.

Elsewhere, spot silver rose 0.5% to $25.02 per ounce, platinum added 0.3% to $1,092.68, and palladium ticked 0.1% up to $1,513.81. (Reporting by Arundhati Sarkar in Bengaluru; editing by Uttaresh Venkateshwaran and Varun H K)