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Gold prices climb as US dollar dips; market eyes US policy outlook

[BENGALURU] Gold prices climbed on Monday buoyed by a weaker US dollar as US bond yields dipped, while investors were cautious ahead of Federal Reserve Chairman Jerome Powell's first congressional testimony.

Mr Powell will testify on the central bank's semi-annual report on monetary policy and the economy on Tuesday, before the US House of Representatives' Financial Services Committee.

Spot gold was up 0.8 per cent at US$1,338.97 an ounce by 0805 GMT after rising to as high as US$1,340.85, the highest in about a week. Prices last week fell 1.4 per cent, their biggest drop in 2-1/2 months.

US gold futures were up 0.9 per cent at US$1,341.9 per ounce.

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The dollar index, which measures the greenback against a basket of major currencies, was down 0.3 per cent at 89.600. It had gained nearly 0.9 per cent last week and pulled away from a three-year low of 88.253 set on Feb 16.

"Global growth appetite is okay. So it's not safe-haven demand per se, but more of a currency influence," said OCBC analyst Barnabas Gan.

The US Federal Reserve, looking past a recent stock market sell-off and concern about inflation, on Friday said it sees steady growth continuing and no serious risks on the horizon that might pause its planned pace of rate hikes.

"But with the US's runaway deficit spending train stoking inflationary fears, gold remains a crucial 'buy on dip' strategy not only to hedge against inflation but also against another untimely correction in equity markets," Stephen Innes, APAC trading head at OANDA, said in a note.

While inflation worries could spur safe-haven gold buying, rising interest rates would pressure the metal because bullion pays no interest.

A bullish target at US$1,354 per ounce for spot gold has been adjusted to US$1,347, based on its current momentum, according to Reuters technical analyst Wang Tao.

Meanwhile, Asian share markets were in a cautious mood on Monday as investors braced for an event-packed week headlined by US inflation data and the first House testimony by the new head of the Federal Reserve, Jerome Powell.

Among other precious metals, silver was up 1.1 per cent at US$16.72 an ounce.

Palladium was up 0.8 per cent at US$1,054.72 per ounce after touching US$1,058.40 earlier in the session, its highest since Jan 31.

Platinum rose 0.7 per cent to US$1,003.50 per ounce.