Gold neared a three-month high on Tuesday, gaining 1.5 percent after Federal Reserve Chair Janet Yellen made it clear she would not make any abrupt changes to the central bank's commitment to a measured tapering of bond purchases.
In her testimony before the U.S. House Financial Services Committee, Yellen said she strongly supports the monetary policy approach driven by her predecessor, Ben Bernanke.
"The overall tone of Yellen's comment is a carbon copy of the Fed's existing policy under Bernanke, so the market is relieved that there will be no tightening any time soon," said Bill O'Neill, partner of New Jersey commodities investment firm LOGIC Advisors.
Chart: Precious Metals
Spot gold was last up 1.2 percent at $1,289 an ounce, its biggest one-day gain in three weeks. Earlier, it hit $1,293.44—the highest price since Nov. 14.
U.S. gold futures for April delivery were settled $15.10 higher at $1,289.80 an ounce.
Yellen's testimony comes at a tricky time given two months of soft employment growth and as a deadline looms on raising the U.S. government borrowing limit before a possible debt default.
(Read more: Bad jobs reports won't change tapering: Yellen)
Speculation that the Fed might hold off further reduction of stimulus had strongly supported gold by keeping interest rates at rock bottom while stoking inflation fears.
In the physical markets, bullion was also underpinned after India's trade ministry said it has recommended easing curbs on gold imports, after a 77 percent drop in imports for January that helped narrow the country's trade deficit.
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