[SINGAPORE] Gold retained gains from a three-day rally on Monday to trade near its highest in two weeks, boosted by a weaker dollar and caution from the Federal Reserve on the timing of a possible hike in US interest rates.
Spot gold was little changed at US$1,182.55 an ounce by 0715 GMT. It climbed to US$1,187.80 on Friday, its highest since March 6, as the dollar tumbled.
The greenback has been under pressure since last Wednesday when the Fed sounded a cautious note on the health of economic recovery in the United States, and slashed its median estimate for the federal funds rate.
Market players' consensus expectation for a US interest rate increase has shifted, with most of Wall Street's top banks now expecting the Fed to hold off until at least September and the odds for a June hike fading, a Reuters poll showed.
"With the rate hike not expected until September, some unwinding of short positions on gold are expected and a weaker dollar in the interim is also set to boost demand for gold," said Phillip Futures analyst Howie Lee.
Traders said the next key level for gold is US$1,200 on the upside.
Gold had dipped to a four-month low before the Fed meet last week as concerns mounted over higher US interest rates which could dent demand for non-interest bearing bullion. But it has recovered since.
The dollar started trade in Asia on the defensive, after a volatile few days in the wake of the Fed's dovish steer, which cast doubts on bullish positions in the greenback.
Despite the modest gain in bullion prices, data showed that investor sentiment has not improved drastically.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.72 per cent to 744.40 tonnes on Friday - the lowest since late January.
Hedge funds and money managers slashed their bullish bets in gold and silver futures and options for a sixth straight week in the week ended March 17, US Commodity Futures Trading Commission data showed on Friday.
In the physical markets, demand seemed to have weakened compared to last week's levels.
In China, the second biggest consumer, premiums eased to US$4-$5 an ounce, lower from Friday's levels of US$6-$7.