Gold prices rose on Monday as a softer US dollar helped the metal rebound from its biggest weekly loss this year, but moves were muted before the debut congressional testimony by US Federal Reserve Chair Jerome Powell later this week. Powell's appearance will be closely watched for clues on the US monetary policy outlook. The dollar index came off its highs, lifting gold after it fell last week to its biggest weekly drop in 2-1/2 months.
Spot gold gained 0.2 percent at $1,331.01 by 1:33 pm EST (1833 GMT), while US gold futures for April delivery settled up $2.50, or 0.2 percent, at $1,332.80 per ounce. "What's been most interesting this year is the breakdown of what gold is tracking most closely, and that has been the US dollar," Standard Chartered analyst Suki Cooper said, adding that underlying investment interest has been muted.
Nominally higher-risk assets were buoyant, with European stocks up as investors bet Powell will flag up an intention to steer a steady course on US monetary policy when he addresses lawmakers this week. That view pressured US 10-year Treasury yields, dragging down the dollar. "Longer-term, the market will start to expect that the Fed will be behind the curve, so buying gold will be attractive," said Daniel Ghali, commodities strategist at TD Securities.
But the Fed, looking past a recent stock market sell-off and inflation concerns, said on Friday it sees steady growth continuing and no serious risks on the horizon that might pause its planned pace of rate hikes. The heads of the European Central Bank and Bank of England are also set to give speeches this week.
Fresh physical demand from China after the end of the week-long Lunar New Year holiday also supported gold, traders said "As long as we don't see a massive reversal and gold breaks below $1,320, that would create a wash-out below $1,300," said Phillip Streible, senior commodities strategist at RJO Futures.
Palladium increased 1.1 percent at $1,058.20 an ounce, while silver was up 0.2 percent at $16.57 an ounce and platinum gained 0.1 percent at $997.20 an ounce.