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Gold moves higher on soft dollar, equities

AP

Gold rose on Tuesday as the dollar eased after comments from a New York Federal Reserve's official that any increase in interest rates should be done cautiously, while U.S. air strikes added to global tension and hence safe-asset demand.

New York Fed bank president William Dudley played down the importance of the various interest rate projections of Fed members released last week, which some in the market had taken as a signal of a hawkish turn.

Any increase in interest rates would hurt investment in non-interest-bearing assets such as bullion.

Spot gold rose 0.6 percent to $1,222 an ouce after dropping for two straight days and reaching its lowest since Jan. 2 at $1,208.36 in the previous session.

U.S. gold futures were last up $5 to $1,222 an ounce.

"The comments from Dudley have allowed gold to open steady and then we have the air strikes in Syria so some geopolitical safe haven buying and the dollar is a bit weaker," Societe Generale analyst Robin Bhar said.

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"But this is just a corrective bounce in a market that has headed lower, now for several days in a row ...and there is strong resistance at $1,230 and we need to see a close above there for a couple of days in a row to remove the immediate bearish tone."

The dollar fell 0.2 percent against a basket of leading currencies, having peaked to a four-year high on Monday before paring gains after Dudley cautioned that the gains could complicate the Fed's job, potentially hurting U.S. economic performance and pushing down inflation.

U.S. stock futures were also moving lower as the United States and several Gulf Arab allies launched air and missile strikes on Islamic State strongholds in Syria on Tuesday, opening a new, far more complicated front in the battle against the militants.

Gold is usually seen as an insurance against political, economic and financial risk but the support gained from international tensions in Ukraine and the Middle East so far this year has been often short lived.

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Investor sentiment remained fragile after gold's gains made throughout the year were wiped out in the past few sessions on prospects of higher interest rates in the United States.

Holdings of SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to their lowest since December 2008 at 774.65 tonnes on Monday.