Gold jumped 1 percent on Wednesday after dropping to a seven-week low the session before, with Federal Reserve Chair Janet Yellen indicating flexibility in raising US interest rates. China's return from a week-long Lunar New Year holiday also buoyed gold prices, with premiums on the Shanghai Gold Exchange rising. Gold rose as the overall tone of Yellen's comments was "a bit dovish", said Howie Lee, investment analyst at Phillip Futures.
"But we don't think this rally will be sustainable. Yellen also made it abundantly clear that the US economy is recovering and she will be looking to normalise interest rates at one point. In the longer term that doesn't spell much optimism for gold." Spot gold was up 1 percent at $1,211.40 an ounce by 0638 GMT, after hitting its weakest since January 5 on Tuesday at $1,190.91. US gold for April delivery rose 1.1 percent to $1,211 an ounce.
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