Gold rallied for a fifth day to its highest level in nearly three weeks on Monday, as softer equity markets prompted investors to tap the asset's safe-haven qualities. The metal's rally comes despite a stronger dollar and bullish comments from the Federal Reserve on the US economy, but follows a near 30 percent loss last year. The upswing in prices failed to dent physical purchases in China , the world's biggest bullion consumer, where demand has picked up ahead of the Lunar New Year and trading volumes on the Shanghai Gold Exchange hit an eight-month high on Monday. "Weaker equities will have more of an impact on gold prices than a stronger dollar," said Helen Lau , an analyst at UOB-Kay Hian Securities in Hong Kong . "It is all about allocation by funds. If there is an increase in allocation towards gold and less towards stocks, there will be a decrease in outflows from gold exchange-traded funds (ETFs) and that is a positive for prices," she said. Lau expects gold to average $1,200 for the year, and says it is likely hit $1,300 in the first quarter. Spot gold rose 0.4 percent to $1,240.90 an ounce by 0739 GMT . It earlier hit a near three-week peak of $1,245.86 . The metal lost nearly 30 percent of its value last year as global stocks jumped and as the Fed announced plans to begin tapering its bond-buying stimulus programme. Record outflows from gold ETFs also hurt prices. On Monday, Asian shares fell to a two-week low after growth in China's services sector slowed sharply last month. The dollar hovered near a four-week high, supported by an upbeat outlook for the US economy. Physical demand for bullion in China remained strong with premiums on the Shanghai Gold Exchange - a physical trading platform - climbing to about $20 an ounce from Friday's $17 . For the 99.99 percent purity gold, volumes traded on the exchange were 24.86 tonnes on Monday - the highest daily volume since May 3 . - Reuters ?
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