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Gold rises to 3-month high as dollar declines

February 11, 2014

Spot gold climbed to its highest in almost three months on Tuesday, as the dollar fell ahead of congressional testimony by new Federal Reserve chief Janet Yellen that could give clues on the pace of its stimulus tapering.

Spot gold rose 0.7 per cent at $1,283.60 an ounce by 1037 GMT, after rising as much as one per cent to the highest since mid-November at $1,287.01 earlier in the session.

US gold futures for April delivery also rose 0.7 per cent to $1,283.30 an ounce, on course for a fifth day of gains, in the longest winning streak since August 2012.

Yellen's testimony comes at a tricky time given two months of soft employment growth and as a deadline looms on raising the US government borrowing limit before a possible debt default.

"I wouldn't be surprised if we see this little rally go up and have a poke above $1,300," Credit Suisse head of precious metals research Tom Kendall said. "But... the market is expecting a little bit too much from Yellen in terms of dovish commentary and I would expect to see quite a bit more selling as we get up to that level."

Gold prices were supported by a weaker US dollar, which was wallowing near a two-week low against a basket of major currencies.

"The US dollar outlook remains pivotal for bullion in 1H14, and we still believe that the export of changing US policy will provide a major challenge to gold this year," VTB Capital said in a note.

The metal has risen around 6.5 per cent since the beginning of the year, after a 28 per cent drop in 2013, as mixed economic data in the United States and emerging-market turmoil weighed on some equity markets.

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Source: Khaleej Times (United Arab Emirates)

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