Gold prices jumped more than 1% on Tuesday to a near two-week high, following the steepest fall in dollars in more than two years as investors bet on U.S. interest rates staying lower for longer.

Spot gold was up 0.9% to $1,987.89 per ounce by 0947 GMT, having earlier hit its highest since Aug. 19 at $1,991.91. U.S. gold futures rose 0.9% to $1,996.10.

"The two drivers for gold are the weaker dollar and lower yields and that will keep the metal moving between the range of $1,800 and $2,100 until the U.S. presidential elections in November," said Robin Bhar, an independent analyst.

"However, at the end of every month we might see some corrections as a result of speculators selling their positions."

The dollar index dropped to a more than two-year low versus rivals, making gold cheaper for holders of other currencies. 

The U.S. Federal Reserve's new monetary policy plan, which may lead to inflation rising marginally and long-term interest rates staying lower, also weighed on U.S. Treasury yields. 

Low interest rates minimise the opportunity cost of owning non-yielding bullion, which is often used as a buffer against inflation and currency depreciation.

Gold has gained about 31% this year, also supported by economic uncertainty stemming from the coronavirus pandemic.

While waning consumer demand remains a headwind, "strong investor demand is likely to continue to provide support for gold," Heraeus Precious Metals said in a note.

"In the near term, gold could move sideways as it consolidates following its rapid rally to record highs in early August."

Elsewhere, silver was up 2.1% to $28.82 per ounce, after hitting its highest since Aug. 11.

Platinum rose 2% to $948.30 and palladium climbed 1.5% to $2,277.05.

(Reporting by Diptendu Lahiri in Bengaluru; Editing by Shinjini Ganguli) ((Brijesh.Patel1@thomsonreuters.com; Within U.S. +1 651 848 5832, Outside U.S. +91 8067493865; Reuters Messaging: Brijesh.Patel1.thomsonreuters.com@reuters.net))