Saxo Bank's head of commodity research Ole Hansen said much further movement in gold on Wednesday would depend on Yellen's answers to questions after her prepared testimony is delivered.
"Bonds are holding onto gains, while the Japanese yen failed to extend its gain," he said. "A long Q&A awaits, so let's see. $1,230 and $16.20 are key levels in gold and silver, above which short-covering could be forced."
The dollar slipped and U.S. Treasury yields fell after Yellen said the central bank would not need to raise interest rates "all that much further."
Immediately after her statement, federal funds futures implied traders saw a 53 percent chance the Fed would raise key overnight borrowing costs at its December meeting, down from 60 percent beforehand, according to CME Group's FedWatch program. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
In the major physical markets, Commerzbank said in a note that higher imports into number two consumer India, reported the previous day, could prove to be the last to show such strength for a while.
"Indian gold traders are likely to have brought purchases forward because a goods and services tax was introduced on gold purchases in India on 1 July," it said. "Many market observers expect imports to be significantly lower in the second half of the year, meaning that the gold price will lack this important crutch for some time."