Gold rose on Thursday, extending its gains into a second session after the nominee for Federal Reserve chairman, Janet Yellen, defended the US central bank's bold steps to spur growth, suggesting the massive bond-buying stimulus will continue. Answering questions before the Senate Banking Committee, Yellen made plain she would press forward with the Fed's ultra-easy monetary policy until officials were confident a durable economic recovery was in place that could sustain job creation.
"The possibility of continued tapering and Yellen's comment about the importance not to pull the plug too early is initially support of gold," said Thomas Power, senior commodity broker at futures brokerage RJO Futures. "In the long run, I think it's somewhat bearish for gold prices as the equities are going to continue to rally off this news," Power said. Spot gold was up 0.8 percent at $1,288.60 an ounce by 12:37 pm EST (1737 GMT), after snapping a four-day losing streak on Wednesday with a gain of nearly 1 percent.
US gold futures for December delivery were up $20 at $1,288.40 an ounce, with trading volume on track to finish in line with its 250-day average, preliminary Reuters data shows. Another analyst said a resurgent dollar could also weigh down on gold prices.
"I expect the dollar to keep rising in the next few weeks and this rebound of gold to be temporary, because if the economy improves, the opportunity cost of holding gold would increase," Natixis analyst Bernard Dahdah said. In another gauge of investor sentiment, outflows from SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, resumed on Wednesday after pausing the previous two weeks. Holdings in the fund fell 2.71 tonnes to a fresh four-year low of 865.71 tonnes.
The World Gold Council cut its outlook for Indian demand in 2013 to around 900 tonnes from the 1,000 tonnes predicted previously as strict import rules introduced by New Delhi bite, while keeping its forecast for China unchanged at 1,000 tonnes. Among other precious metals, silver rose 0.9 percent to $20.76 an ounce. Platinum was up 0.7 percent at $1,441.24 an ounce, while palladium rose 1.2 percent to $738.75 an ounce.