By Jan Harvey
LONDON (Reuters) - Gold rose on Wednesday, recovering from the previous day's seven-week lows, after comments from Federal Reserve Chair Janet Yellen suggested the central bank would not be rushed into raising interest rates.
That weighed on the dollar, supporting gold. The precious metal rose more than 1 percent to a session high earlier in Asia after Chinese buyers returned from the Lunar New Year holiday, driving premiums higher on the Shanghai Gold Exchange.
Spot gold was at $1,207.30 at GMT, up 0.6 percent, after earlier peaking at $1,211.80 an ounce. U.S. gold futures for April delivery were up $9.70 an ounce at $1,207.00.
The dollar fell after Yellen held back on Tuesday from giving a clear view on when the Fed will begin hiking rates, sparking a rally in precious metals on Wednesday that pushed silver up more than 3 percent and palladium to a six-week high.
Gains in gold are likely to be limited, however, by expectations that rates remain on track to rise. That would lift the opportunity cost of holding non-yielding bullion, while pressuring the dollar, in which the metal is priced.
Natixis analyst Bernard Dahdah said he still expects the Fed to hike rates in June. "I don't think (what Yellen said) was as clear cut as saying, we're not going to have an interest rate rise any time soon," he said. "That's probably why the price of gold is up, but it's still in the range it was."
Yellen said on Tuesday that while the Fed is preparing to consider rate hikes on a "meeting-by-meeting basis", an increase is not likely for at least the next couple of meetings. She is likely to take the same stance when she testifies before the House Financial Services Committee on Wednesday.
In China, premiums on the Shanghai Gold Exchange rose to $5-$6 an ounce over global spot prices from $3-$4 before the New Year break began on Feb. 18, reflecting firm demand from the world's No. 2 gold consumer.
"China returned from their Lunar New Year holidays today and we saw strength across the board for the precious metals," MKS said in a note. "Good demand (was) evident throughout the entire first session after the week-long break."
Silver was up 1.5 percent at $16.46 an ounce. Spot platinum was up 0.7 percent at $1,168.95 an ounce, while spot palladium was up 1.3 percent at $801.05 an ounce, off a six-week high of $804.10 hit earlier in the session.
(Additional reporting by Manolo Serapio Jr.; Editing by Ruth Pitchford)
