Gold futures rose on Wednesday on speculation that a slumping U.S. economy will prevent the Federal Reserve from lowering interest rates, while soaring oil prices and a weaker dollar boosted the demand for the precious metal.

Gold futures for August delivery rose $6.60, or 0.7 percent, to $893.50 an ounce on the Comex division of the New York Mercantile Exchange. Gold rallied 39 percent from Sept. 17 to March 17 as the Fed reduced rates from 5.25 percent.

Although as yet unable to break out of the price channel it has carved out recently, gold looked quite a bit more buoyant today, said Jon Nadler, senior analyst at Kitco Bullion Dealers, in a research note.

However, aside from short-term fund plays following various economic or geopolitical news items, the bulk of would-be players remained sidelined ahead of next week's Fed meeting, he said.

In currency trading, the dollar took a downturn as traders reconsidered bets that the Federal Reserve will be raising interest rates later this year as economic woes continue to hit stocks.

The dollar index , which tracks the performance of the greenback against other major currencies, fell 0.1 percent to 73.44.

Weakness in the U.S. dollar typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies.

Crude-oil futures closed higher Wednesday, recovering from their lowest level in more than a week after a rise in refinery activity helped boost distillate inventories, crude supplies have been declining since mid-May. Crude closed at $136.68 a barrel, its strongest closing level since June 12, up $2.67 on the New York Mercantile Exchange.

Also on the Nymex, July platinum gained $27.60 to $2,091.90 an ounce. September palladium added $7.95 to $471.80 an ounce and July copper futures rose 10 cents to $3.75 a pound.