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Gold gains 1% on softer dollar, views on Fed rate outlook

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AP

Gold rose to its highest in nearly two weeks on Tuesday as the dollar fell in the wake of disappointing U.S. economic data that raised doubts over a Federal Reserve interest rate rise this year, while platinum rallied 3 percent.

Spot gold rose 1.4 percent to $1,151.20 an ounce, the highest since Sept. 24, and was last up 1 percent at $1,146.91 an ounce. U.S. gold futures for December delivery settled up 0.8 percent at $1,146.40 an ounce.

The gains added to Friday's 2.2 percent jump, the biggest one-day rise since Jan. 15, which followed data showing U.S. employers had slammed the brakes on hiring over the last two months.

Then on Monday, data showed the pace of growth in the U.S. services sector decelerated in September, though some analysts said a U.S. rate hike in December could not be ruled out entirely.

"The Fed is worried about the implications of continuing low inflation or even outright deflation because of low oil prices, but a December rate hike is still possible," Mitsubishi Corp strategist Jonathan Butler said.

Analysts also cited increasing international political tensions after Russia's warplanes violated the air space of alliance member Turkey at the weekend.

"Increasing tensions between Russia and Turkey are helping gold today... That should continue in the short term, but then the focus will be shifting back to what the Fed is going to do and the dollar," Commerzbank analyst Daniel Briesemann said.

The dollar was down 0.7 percent against a basket of currencies and global shares rose.

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Platinum rose 3.1 percent to $940.25 an ounce, having hit a near seven-year low of $888 on Friday, offering industrial buyers a relatively good price, said James Steel, chief metals analyst for HSBC Securities in New York.

"Its ability to get over $900 has led there to be some modest revaluation of auto diesel demand going forward and may not be as dire as the knee-jerk reaction to the auto diesel issue," Steel said.

SPDR Gold Trust, the top gold-backed exchange-traded fund, saw its first outflow in two weeks on Monday.

Silver rose to the highest in more than three months at $16.08 an ounce, extending gains above its 200-day moving average. It has gained nearly 10 percent since Thursday's close.

Palladium reached its highest since June at $712.50 an ounce as it continued to benefit from expectations that demand for gasoline cars, where the metal is used in catalysts, would rise due to the Volkswagen diesel engine emissions scandal.