PRECIOUS-Gold cuts losses as dollar falls after Bernanke's comments
* Fed testimony closely watched for clues on U.S. policy
Largest physical gold fund reports further outflow
* Platinum's premium to gold near largest in 2 years
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By Jan Harvey
LONDON, July 17 (Reuters) - Gold trimmed losses on Wednesday as the dollar retreated after Federal Reserve Chairman Ben Bernanke said the U.S. central bank still expected to start scaling back its stimulus later this year, but left open the option of changing that plan.
"Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," he told the U.S. House of Representatives Financial Services Committee in prepared remarks.
Investors are now expecting Bernanke's semi-annual statement to Congress at 1400 GMT, which will be followed by a lengthy question and answer session with the committee's members.
Spot gold, lower initially, was up 0.2 percent to $1,294.26 an ounce by 1316 GMT, while U.S. gold futures for August delivery rose 3.00 to $1,293.80 an ounce.
The dollar fell 0.1 percent against a basket of currencies after the Fed comments, lifting commodities priced in the U.S. unit.
"One could argue that he lifted up the dovish expectations, because you are actually seeing the dollar reversing its earlier firmness," VTB Capital analyst Andrey Kryuchenkov said.
"But we don't see strong reasons that could push the market much higher, as investors remain sidelined and volumes are low for the summer lull."
Gold has fallen nearly 25 percent this year, hurt by fears the Fed is set to curb its quantitative easing measures, which have driven gold to record highs in recent years by pressuring long-term interest rates while stoking inflation fears.
The Fed indicated earlier this year that it could be set to rein in its $85 billion monthly bond-buying programme, but Bernanke's more dovish tone later prompted a sharp drop in the dollar and a rebound in gold.
GOLD STRUGGLES TO BREAK $1,300/OZ
Gold hit a three-week high of $1,298.36 on Thursday last week but has repeatedly failed to breach the $1,300 level. Physical demand has also retreated as prices have bounced off recent lows.
Buying interest from China has been subdued over the last few days as indicated by Shanghai premiums, which have eased to around $25 per ounce from $36 from last week.
Outflows from gold-backed exchange-traded funds, which issue securities backed by physical bullion, continued on Tuesday, with the largest, New York's SPDR Gold Trust, reporting a 1.5 tonne drop in its holdings.
That brings the fund's outflows for the year to 413 tonnes, taking its overall holdings to a 4-1/2-year low.
Among other precious metals, silver rose 0.2 percent at $20.04 an ounce, tracking gold. Spot platinum was down 0.1 percent at $1,422.99 an ounce, while spot palladium fell 0.2 percent at $732 an ounce.
Platinum's premium over gold held at around $130 an ounce on Wednesday, close to this week's near two-year high of $140.
Platinum prices are taking support from the threat of supply outages in major producer South Africa as wage negotiations between mining companies and unions grind on.
"The platinum group metals and gold were buoyed by a wage impasse as the mining unions rejected the Chamber of Mines' initial offer for a 4 percent pay hike," HSBC said in a note.
(Additional reporting by Clara Denina; editing by James Jukwey)