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Gold extends gains after best month in a year

[MANILA] Gold advanced at the start of the month on Monday, extending gains after ending January with its biggest monthly gain in a year, amid a softer dollar and uncertainty over the global economy.

Inflows into the world's largest gold-backed exchange-traded fund were also the strongest in a year last month as investors moved into gold due to volatility in other assets including equities.

Spot gold was up 0.3 per cent at US$1,120.75 an ounce by 0312 GMT. Bullion gained 5.4 per cent last month, its largest gain since January 2015.

Strong inflows into gold exchange-traded funds, Chinese buying ahead of the Lunar New Year and support from the volatility in other asset classes combined to boost gold in January, said Mark Keenan, head of commodities research in Asia at Societe Generale. "But in the context of a rising interest rate outlook in the US, it's going to be very difficult for gold to hold on to these gains," he said.

Societe Generale sees gold averaging at US$1,040 in the first quarter and US$955 in the last quarter of the year.

US gold for April delivery was up 0.5 per cent at US$1,121.60 an ounce, with the US dollar down slightly versus a basket of currencies.

Hedge funds and money managers boosted their bullish bet in COMEX gold to a 12-week high in the week to Jan 26, US Commodity Futures Trading Commission data showed on Friday.

Holdings of the largest gold-backed exchange-traded-fund, New York's SPDR Gold Trust, increased about 4 per cent in January, the most in a year.

Spot gold touched a 12-week high of US$1,127.80 on Wednesday, after the Fed said it was closely watching the global economy and financial markets and their impact on the US economy.

Risks from China remained after an official survey on Monday showed activity in the Chinese manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, missing market expectations.

US economic growth braked sharply in the last quarter of 2015, expanding at an annual 0.7 per cent rate.

The data underpinned hopes that the Federal Reserve would slow the pace of future US rate increases, aiding gold.

Spot silver rose 0.2 per cent to US$14.29 an ounce, platinum slipped 0.4 per cent to US$867.68 and palladium was up 0.2 per cent at US$499.55.