[LONDON] Gold rose on Monday, as the dollar edged lower on renewed oil market weakness and concerns over the global economic outlook which have raised questions about the Federal Reserve's pace of interest rate tightening.
The Federal Open Market Committee meets this week and is widely expected to leave its federal funds rate unchanged at 0.25-0.50 per cent on Wednesday.
Spot gold rose 0.5 per cent to US$1,103.35 an ounce by 1052 GMT, extending a near one per cent increase made last week, when investor appetite for risk evaporated on worries China's economic growth is slowing down.
US gold for February delivery gained 0.8 per cent to US$1,104.70 an ounce.
Gold had scaled a two-month high of US$1,112 on Jan 8, but lacked upward momentum before steadying mostly below US$1,100.
"Gold's technical picture is slowly improving but a more sustained rally could only be confirmed by a break above US$1,112-US$1,113," said ActivTrades chief analyst Carlo Alberto de Casa.
Gold fell more than 10 per cent last year, on expectations that higher U.S. interest rates would hit demand.
The Fed lifted rates for the first time in nearly a decade in December and hinted at gradual increases in 2016.
But a possible consumer pullback could now derail the US central bank's tightening plans.
"Given the turbulence in financial markets, the Fed might not be able to hike interest rates too many times in 2016," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
"If gold can stay above US$1,100 in the coming days, it may signal a further rebound, maybe even to US$1,200 in the coming months."
Expectations for a March rate increase are starting to fade, and economists polled by Reuters now forecast three hikes in 2016 rather than the four initially floated by the Fed.
The US government will release its first reading on fourth-quarter economic growth on Friday. Economists polled by Reuters suggest US GDP growth of 0.80 per cent in October-December and annual expansion of 2.5 per cent in 2016.
Hedge funds and money managers increased their bullish bets in Comex gold in the week to Jan 19, and boosted their positive bets in silver to the highest in more than two months, U.S. Commodity Futures Trading Commission data showed on Friday.
Spot silver rose 0.9 per cent to US$14.15 an ounce and palladium fell 0.1 per cent to US$495.90. Platinum climbed 1 per cent to US$837.74 per ounce, regaining some lost ground after falling to a seven-year low of US$806.31 last week.