Gold climbs to near three-week high on safe-haven demand

Janet Yellen said US economy is on a solid course, still on track to warrant further interest rate hikes

Gold jumped to its highest in nearly three weeks on Monday on safe-haven demand and a softer dollar, but pared some gains after Asian shares erased early losses.

Weak economic data and uncertainty over US monetary policy have sparked risk-averse sentiment in the market, underpinning demand for safety assets such as gold and the Japanese yen, which is trading near levels not seen since 2014.

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Spot gold rose to $1,252.26 an ounce on Monday, its highest since March 22. It later pared some gains to trade up 0.8% at $1,249.32 by 0643 GMT.

"Markets are still jittery about what's going on in the global economy and gold is the preferred safe-haven," said OCBC Bank analyst Barnabas Gan.

Gold will remain elevated in the short term, Gan said, but he expected the metal to give back some of its gains later in the year as the Federal Reserve carries out two rate hikes.

Higher rates would weigh on gold by lifting the opportunity cost of holding non-yielding bullion.

Waning expectations for further rate increases this year helped gold to its best quarter in nearly 30 years in the three months to March.

Fed Chair Janet Yellen said on Thursday the US economy is on a solid course and still on track to warrant further interest rate hikes.

The US central bank raised rates in December for the first time in nearly a decade.

New York Fed President William Dudley on Friday said the central bank must approach further rate hikes cautiously and gradually because of lingering external risks to the US economy, despite some strength at home and welcome hints of inflation.

The dollar slid 0.2% against a basket of major currencies to 94.011, its lowest since mid-October.

Asian stocks erased early losses and edged up on Monday as Chinese inflation data fanned optimism Beijing will continue with loose monetary policies, though Japan's Nikkei stock index closed down 0.4%.

Data on Friday showed hedge funds and money managers cut their net long positions in gold futures and options in the week to April 5, but still not far from a two-month high.

Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.22% to 817.81 tonnes on Friday.