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Gold hits one-week high after central bankers' comments

[JOHANNESBURG] Gold rose to its highest in more than a week on Monday as the dollar weakened and the euro powered ahead after the head of the European Central Bank refrained from talking down the single currency at a high-profile meeting of central bankers.

At the meeting in Jackson Hole in the US state of Wyoming, the ECB's Mario Draghi said the bank's ultra-loose monetary policy was working and the euro zone's economic recovery had taken hold, refraining from commenting on the euro's recent strength.

That was enough to push the euro to its highest in more than 2-1/2 years against the US dollar while the dollar index fell to its lowest since May 2016.

"Draghi did not refer to the strong euro being a break on policy normalisation - this is what it triggered the rally in the euro and the price reaction in gold mirrors what the currencies did," said Julius Baer analyst Carsten Menke.

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Spot gold rose 0.5 per cent to US$1,297.51 an ounce by 1125 GMT, having touched its highest since Aug. 18 at US$1,298.58.

US gold futures were up 0.4 per cent at US$1,303.

Trade was thin because of a UK public holiday.

At Jackson Hole, US Federal Reserve Chair Janet Yellen made no reference to US monetary policy but instead focused on financial regulations, leading traders to expect interest rates to be raised more slowly.

Gold is highly sensitive to rising US rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.

ABN AMRO commodities analyst Georgette Boelle said gold could test the psychologically important level of US$1,300 this week if US data is supportive.

Further supporting gold was geopolitical uncertainty sparked by US President Donald Trump's renewed threat to scrap the North American Free Trade Agreement.

Speculators raised their net long position in COMEX gold for the sixth straight week in the week to Aug 22.

In other precious metals, silver was up 0.6 per cent at US$17.16 an ounce, having touched its highest since Aug 18 at US$17.21.

Platinum rose 0.3 per cent to US$975.10 and palladium edged up 0.3 per cent to US$933.70, close to a 16-year high of US$940.50 hit on Friday.

The strength in palladium seemed to be driven by investment demand rather than fundamental demand for the metal's use in autocatalytic converters, Julius Baer's Menke said.