Gold tops $1,300 on stimulus hopes, weaker dollar

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold climbed above $1,300 an ounce on Wednesday for the first time since August as a softer dollar, worries over the global economy and hopes of stimulus measures from the European Central Bank (ECB) fuelled safe-haven bids.

Financial markets have been nervous about the ECB policy meeting on Thursday, when the bank is widely expected to unveil a quantitative easing (QE) programme that is likely to boost demand for bullion.

"Prices have been boosted by hopes of QE by the European Central Bank, which is expected to have far-ranging effects on the bond market," said Howie Lee, an investment analyst at Phillip Futures.

"The prospects of looming deflation and increased volatility in financial markets have added to gold's gains," Lee said, adding that global growth worries were adding to the metal's safe-haven appeal.

Spot gold hit a session high of $1,303.20, its loftiest level since Aug. 18, and was at $1,299.60 an ounce by 0752 GMT, up 0.5 percent on the day.

The dollar lost some ground as the yen strengthened after the Bank of Japan kept its monetary policy steady. [USD/]

A softer greenback makes dollar-denominated gold cheaper for holders of other currencies, while also boosting its hedge appeal.

Bullion has performed well since the beginning of the year as its safe-haven appeal has been burnished by uncertainties in Europe.

Traders are watching out for Sunday's snap election in Greece. Polls suggest anti-bailout party Syriza will win, which may set off fresh turmoil in the euro zone.

Worries over the health of the global economy have added to gold's demand. On Tuesday the IMF cut its forecast for global growth in 2015 and called on governments and central banks to pursue accommodative monetary policies and reforms.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, jumped 1.55 percent to 742.24 tonnes on Tuesday.

But some in the market warned that gold could see profit-taking at these levels as it has climbed steeply, gaining nearly 10 percent this month after two straight annual declines.

"While we do not discount further safe-haven-inspired gains in gold, the yellow metal may be in need of a price consolidation," HSBC analyst James Steel said, adding that softer physical buying might also keep a lid on prices.

Other precious metal prices rose along with gold.

Spot silver jumped more than 2 percent on Wednesday and has gained about 16 percent so far this month. Palladium rose 1 percent to stretch its rise to a third session, while platinum climbed 0.4 percent.

(Additional reporting by Manolo Serapio Jr.; Editing by Alan Raybould and Himani Sarkar)