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Gold prices edge up as Fed chair's speech weighs on US dollar

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[BENGALURU] Gold prices inched up on Monday after marking their biggest one-day percentage gain in over a year the session before, with the US dollar easing on comments from the Federal Reserve chairman in support of a gradual approach to raising rates.

Spot gold was up 0.1 per cent at US$1,206.57 an ounce as of 0105 GMT. It rose about 1.7 per cent on Friday in its biggest one-day percentage gain since May 17, 2017.

US gold futures were almost flat at US$1,213 an ounce.

The dollar index, which tracks the greenback against a basket of six major currencies, was down 0.1 per cent at 95.075.

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Fed chair Jerome Powell on Friday defended the US central bank's push to raise interest rates as healthy for the economy and signaled more hikes were coming despite President Donald Trump's criticism of higher borrowing costs.

Mr Powell has begun putting his stamp on the US central bank as someone who will rely more on data-informed judgment and less on some of the models and theoretical values that have shaped the Fed's course in recent years.

But St. Louis Fed President James Bullard on Friday raised new alarm bells over the US central bank's plan to keep raising interest rates, warning that even one more rate hike could set the stage for recession.

North Korea's state-controlled newspaper on Sunday accused the United States of "double-dealing" and "hatching a criminal plot" against Pyongyang, after Washington abruptly cancelled a visit by Secretary of State Mike Pompeo.

A rise in activity in gold options amid geopolitical tensions and a record-long bull market for US equities suggests that investors are betting gold prices have found a floor, traders said.

Hedge funds and money managers increased their net short position in COMEX gold contracts to another record in the week to Aug 21, US Commodity Futures Trading Commission (CFTC) data showed on Friday.

Demand for physical gold was modest in India last week as the top bullion consuming state of Kerala coped with floods, while interest for the metal remained lacklustre elsewhere in Asia as buyers awaited a dip in prices.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.35 per cent to 764.58 tonnes on Friday from 767.23 tonnes on Thursday.

REUTERS