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Gold hits two-week high as Brexit woes boost safe-haven appeal

FILE PHOTO: Gold bars at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, March 18, 2016. REUTERS/Leonhard Foeger/File Photo

By K. Sathya Narayanan

(Reuters) - Gold scaled a near two-week peak on Wednesday, after reclaiming the key $1,300 level in the previous session, as investors opted for the safe-haven metal after British lawmakers rejected an amended exit deal, while a weaker dollar lent further support.

Spot gold was up 0.3 percent at $1,305.21 per ounce, as of 0329 GMT, after touching its highest since March 1 at $1,305.69 earlier in the session.

U.S. gold futures rose 0.5 percent to $1,305 an ounce.

The British Parliament on Tuesday rejected Prime Minister Theresa May's deal to quit the European Union for a second time, deepening the country's political crisis days before the planned departure date on March 29.

"The ongoing Brexit (uncertainties) has diminished risk appetite as investors are increasingly unnerved on the potential of a 'hard Brexit' deal," said Benjamin Lu, analyst with Singapore-based Phillip Futures.

Asian share markets were mostly in the red on Wednesday as a risk-off mood gripped investors, while a frazzled pound awaited its fate ahead of yet another make-or-break parliamentary vote on Brexit.

British parliament will vote later in the day on whether to back a no-deal Brexit, and if that fails, a further vote on Thursday will decide whether to extend the Brexit deadline.

Meanwhile, U.S. consumer prices rose for the first time in four months in February, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years, supporting the Federal Reserve's 'patient' stance on U.S. interest rate hikes.

The weak U.S. inflation data suggests that policy makers may hold back from additional rate increase, ANZ analysts said in a research note.

Higher rates reduce investor interest in non-yielding bullion.

The dollar index dropped about 0.3 percent in the previous session on the tame U.S. inflation data, making bullion cheaper for investors holding other currencies. [USD/]

The disappointing U.S. data, which followed a spate of weak reports from other economies, cascaded concerns on slowdown in global growth.

"We are optimistic on gold in long-term perspective. Markets are going to be more interested in safe-haven assets in light of volatility from a slowing economy," Lu of Phillip Futures said.

Reflecting investors sentiment, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose about 0.4 percent on Tuesday. Holdings have risen after seeing heavy liquidations due to a sharp correction bullion prices.

Among other precious metals, palladium was down 0.3 percent at 1,537.47 per ounce.

Silver gained 0.1 percent to $15.44 per ounce, after touching its highest since March 1 earlier in the session.

Platinum dipped about 0.2 percent to $835.97 per ounce.

(Reporting by K. Sathya Narayanan and Nallur Sethuraman in Bengaluru, Editing by Sherry Jacob-Phillips)