Gold Up On Dovish Remarks From Yellen

Gold is headed for a second daily gain Thursday, on hopes the U.S. Federal Reserve will sustain its super-easy stimulus program, and will start its tapering later than thought.

The U.S. dollar was weaker against a number of Asian currencies after Federal Reserve chair nominee Janet Yellen released remarks suggesting the central bank should continue supporting the U.S. economy with stimulus.

Yellen, in remarks released ahead of her closely-watched Senate confirmation hearing on Thursday to succeed Fed chief Ben Bernanke, said the Fed has "more work to do" to help the economy, indicating she was in no hurry to start tapering stimulus.

Yellen said that unemployment at 7.3% in October was still too high, “reflecting a labor market and economy far short of their potential”.

The comments sent U.S. stocks surging and supported bond prices. Returns from U.S. bonds are closely watched by the gold market given that the metal pays no interest.

- Spot gold last traded at $1283.06 an ounce, compared with $1281.66 late Wednesday. As of 07:31 GMT

- Spot silver rose as much as 1.7 percent to $20.90 an ounce, snapping five days of losses, and traded at $20.786. Prices touched to $20.4488 yesterday, the lowest level since Aug. 9.

Gold Demand
Global gold demand fell 21 percent in the third quarter by outflows from bullion funds alongside a drop in buying from India, a report by the World Gold Council showed Thursday.

Gold consumption fell to 868.5 tonnes in the last quarter, a four-year low, from 1,101.4 tonnes in the same period of the previous year, according to the World Gold Council`s latest Gold Demand Trends report, prepared in association with Thomson Reuters GFMS.

The demand slide is likely to slow in the fourth quarter, the WGC`s managing director for investment, Marcus Grubb, said, as selling of gold-backed exchange-traded funds, which have seen outflows of nearly 700 tonnes this year, eases.

However, it is still likely to fall for a second consecutive year. "From where we were last year in terms of demand, which was 4,382 tonnes, we`ll be down between 5 and 10 percent at year end," Grubb said.

"That`s not as (big a drop) as we`ve seen so far, which is 12-13 percent, but it`s still significantly down on 2012."

"That`s almost all due to the ETFs," he said.

Flows from the gold-traded funds are watched closely as they provide an insight into the thinking of investors who have big positions in gold.

Demand in India, historically the world`s number one gold consumer, for jewellery, coins and bars fell 71 tonnes or 32 percent in the quarter after the government increased import tariffs in a bid to tackle a record current account deficit.

China accounted for the bulk of consumer demand in the last quarter, with offtake of 209.6 tonnes. Chinese gold jewellery buying rose by nearly a third, although coin and bar demand fell 8 percent to 45.9 tonnes.