LONDON: Gold rose on Wednesday as the dollar fell after Federal Reserve officials allayed investor concerns that the US central bank would soon reduce its bond-buying programme, while Chinese physical demand also lent some support to prices.
On Tuesday, New York Federal Reserve Bank President William Dudley and St. Louis Fed chief James Bullard said that further economic progress was needed before they would support curtailing bond purchases.
Spot gold reversed Tuesday's 1.3 percent losses and rose to a session high of $1,389.70 an ounce. It was trading at $1,384.91 by 0943 GMT, still up 0.7 percent.
US gold futures for June delivery were up 0.5 percent at $1,383.80 an ounce.
The metal fell for eight sessions out of the past nine and touched $1,338.95 on Monday, its weakest since April 16, when it recorded the worst daily loss for 30 years.
The dollar fell against the euro and a basket of main currencies ahead of Fed Chairman Ben Bernanke's testimony to Congress at 1400 GMT on the state of the US economy, which should give clues on his monetary easing stance.
The Federal Open Market Committee also releases the minutes of its April 30-May 1 meeting later in the day.
"The correlation of the dollar with gold has been quite strong lately and today's weakness in the US currency after Fed officials said it may be too early to be pulling back of QE certainly helps the metal," Societe Generale analyst Robin Bhar said.
"We are getting corrective bounces but we are still in a downtrend and these bounces are not strong enough to reverse that, as investors continue to divest and physical demand is not as strong as it was one month ago."
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