* Fed chair remarks revive prospect of aggressive rate cut
* Dollar droops to near one-week low
* Palladium surges above $1,600/oz to 16-weeks high
* SPDR Gold holdings rose 0.8% on Wednesday (Updates prices)
By Brijesh Patel
July 11 (Reuters) - Gold prices scaled a more than one-week peak on Thursday, as the dollar slipped after dovish remarks from the U.S. Federal Reserve Chairman Jerome Powell boosted the case for an interest rate cut later this month.
Spot gold was up 0.3% at $1,422.40 per ounce as of 0711 GMT, after earlier hitting its highest since July 3 at $1,426.
U.S. gold futures jumped 0.9% to $1,424.80 an ounce.
“Last night’s move from the Fed is pretty convincing that they are going towards more of a risk management overview policy which is dovish,” said Stephen Innes, managing partner at Vanguard Markets, adding “also dollar trading lower is a huge support for gold”
“Fed not only focused on concerns within the U.S. economy, but also took into consideration the global economy, negative impact from trade wars and basically hitting all the right buttons for gold bulls.”
In his testimony to Congress, Powell pointed to “broad” global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the Trump administration’s trade conflict with China and other nations.
Adding to a generally dovish tone in his testimony, the minutes from the Fed’s previous policy meeting showed many policymakers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut.
“Powell’s testimony made sure that there is a rate cut on the cards this month. He has provided a loser monetary policy base for gold prices gain further,” said Howie Lee, an economist at OCBC Bank.
In the wake of Powell’s comments, the dollar dropped to a five-day low, while the U.S. Treasury yield curve steepened.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.
The Fed chair’s cautious stance on the world’s largest economy helped revive some bets on heftier easing at its next policy meeting on July 30-31 - chance of a 50 bps cut rose to 27.6% from 3.3% on Tuesday, according to CME Group’s FedWatch tool.
Prospects of a U.S. interest rate cut also spurred investors towards riskier assets, with the S&P 500 briefly crossing the 3,000-point mark for the first time.
“When we see this correlation where gold is going up and equity markets are also going higher this is very bullish signal for gold. Gold to me is looking at a bigger picture which is global risk, growth sentiment, escalations in the Middle East,” Innes from Vanguard Markets said.
Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.8%on Wednesday.
Elsewhere, silver rose 0.2% to $15.27 per ounce, platinum gained 0.4% to $828.15.
Palladium climbed 0.8% to $1,600.51 an ounce, after hitting its highest since March 22 at $1,602.50. (Reporting by Brijesh Patel in Bengaluru; Editing by Uttaresh.V and Subhranshu Sahu)