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Gold nears 13-month peak after China data

[LONDON] Gold edged towards a 13-month high on Tuesday, supported by a weaker dollar and lower European shares after Chinese trade data fuelled concerns about the state of global demand.

China's February exports slumped 25.4 per cent from a year earlier while imports dropped by 13.8 per cent.

Spot gold rose 0.5 per cent to US$1,273.32 an ounce by 1308 GMT, within reach of Friday's peak of US$1,279.60, its highest since Feb. 3 last year.

U.S. gold for April delivery gained 0.8 per cent to US$1,274.20. "Uncertainty about the global economy and investor risk aversion have been a supporting theme for gold this year," said Carlo Alberto de Casa, ActivTrades' chief analyst. "The metal is challenging last week's 13-month peak, while February's high around US$1,260 has become a strong technical support level." The dollar was unchanged against a basket of main currencies, having earlier hit a one-week low versus the Japanese yen, while the pan-European FTSEurofirst 300 index fell 1 per cent.

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The next main market focus is Thursday's policy review by the European Central Bank, followed by the U.S. Federal Reserve's policy meeting on March 15-16.

The ECB is expected to ease monetary policy, but investors are uncertain about how far it will go. The Fed lifted interest rates for the first time in nearly a decade in December.

Gold could test US$1,300 an ounce, more than 2 per cent higher than its current level, if the Fed keeps rates on hold, said Daniel Ang, analyst at Phillip Futures in Singapore. "A lot of traders are trying to anticipate a 'no rate hike'scenario, causing a bit of an increase in gold," Ang said.

Fed Governor Lael Brainard, who has emerged as a leader of the central bank's dovish faction, argued for patience with regard to interest rate rises. But Fed Vice Chair Stanley Fischer warned that inflation is showing signs of accelerating, words that policymakers often use when signalling a preference for raising rates.

Supporting bullion, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped slightly on Friday but stayed near the highest since September 2014 at 25.5 million ounces.

Goldman Sachs is sticking to a near-term target of US$1,100 for gold.

Spot silver dropped 0.2 per cent to US$15.63 an ounce, while spot platinum rose 0.2 per cent to US$1,001.60 after hitting a four-month high in the previous session.

Palladium was down 0.7 per cent at US$570.61 after touching US$580.56, its strongest since November.