Gold rose toward $1,400 an ounce on Monday after a 2 percent decline last week, with investors buying bullion as the dollar weakened, China kept interest rates steady and a US tax cut extension loomed. "Gold is getting a lift from the lack of action by the Chinese central government, and you add in prospect of some type of tax deal getting done, you've got a good underpinning for gold, said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC in Chicago.
Chinese inflation soared past forecasts to a 28-month high in November and showed signs of spreading beyond food prices. The country has boosted bank reserves, which investors see as less aggressive than an interest rate hike. Spot gold rose 0.8 percent to $1,394.81 an ounce at 12:32 pm EST (1732 GMT). US gold futures for December delivery rose $11.20 an ounce to $1,396.10.
Silver resumed its rally and sharply outperformed gold. It climbed 3.4 percent to $29.52 an ounce. COMEX gold and silver futures volume so far were both more than 50 percent below their 30-day averages, preliminary Reuters data showed, as some trading desks and funds already have closed their books ahead of the year end. Gold hit a record high at $1,430.95 an ounce last Tuesday but quickly surrendered gains to end the week down 2.2 percent.
Speculative buyers have increased net longs, or bullish positions, by 2.3 percent in the week up to December 7, while silver's net longs dipped 3.2 percent, CFTC's weekly Commitments of Traders report showed. Investors also had an eye on Federal Reserve policy makers who meet on Tuesday. The Fed's bond buying program has boosted gold in recent months as investors worry that loose monetary policy could eventually result in inflation.
On the investment side of the gold market, holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, declined by a further 3.95 tonnes on Friday. The trust saw outflows of 8.2 tonnes of metal last week, or 0.6 percent of its total gold holdings, its biggest one-week outflow since early October. It is still the world's sixth-largest holder of gold, ahead of Switzerland and Japan. Platinum rose 1.7 percent to $1,692.99 an ounce, and palladium gained 2.8 percent to $748.97.
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