Gold prices have extended their rally into a sixth straight trading session, climbing to a fresh three-month high as the US dollar pared its gains.
The most actively traded contract, gold for April delivery, on Wednesday rose $US5.20, or 0.4 per cent, at $US1,295.00 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices have climbed 3.5 per cent since February 4, as some investors wagered that weaker US employment data would prompt a more accommodative stance from the Federal Reserve. Gold is considered a hedge against inflation and a weaker dollar, two risks associated with the central bank's loose monetary policy.
Federal Reserve Chairwoman Janet Yellen bolstered this view on Tuesday, when the new central bank chief told Congress that reductions in the Fed's stimulus efforts were not on a preset course. Yellen said the Fed would act should economic data warrant it, echoing the stance of her predecessor.
On Wednesday, gold prices extended their rally as the US dollar trimmed some of its early gains against a basket of international currencies. The ICE Dollar Index was recently at 80.70, having backed off highs of 80.83 set earlier in the day.
"There was more upheavals in currencies ... and that worries people," said George Gero, a senior vice president with RBC Capital Markets Global Futures.
When the US dollar declines in value, dollar-denominated gold futures become less expensive for traders who use foreign currencies to fund their purchases, luring these buyers into the market. Some investors also view gold as an alternative to currencies and as a safe haven.
Gold traders now turn their sights to Yellen's second round of Congressional testimony on Thursday. While the Fed chief is expected to present the same prepared remarks to the Senate as she did to the House on Tuesday, traders will be looking for new insights during the question-and-answer session.
Settlements (ranges include open-outcry and electronic trading):
London PM Gold Fix: $US1,289.50; previous PM $US1,282.00
Feb gold $US1,295.00, up $US5.20; Range $US1,283.90-$US1,296.40
Mar silver $US20.341, up 18.8 cent; Range $US20.080-$US20.390
Apr platinum $US1,407.30, up $US19.50; Range $US1,385.00-$US1,408.80
Mar palladium $US729.05, up $US12.70; Range $US716.50-$US729.90
