Gold rises 1% after Fed reaffirms dovish stance

[BENGALURU] Gold prices rose over 1 per cent on Wednesday after the US Federal Reserve reiterated its accommodative monetary policy which also weakened the US dollar.

Spot gold rose 0.8 per cent to US$1,743.93 per ounce by 1642 EDT, after gaining as much as 1.2 per cent.

US gold futures settled 0.2 per cent down at US$1,727.10.

The Federal Reserve on Wednesday repeated its pledge to keep the benchmark overnight interest rate near zero for years to come.

The central bank sees the economy growing 6.5 per cent this year, the most since 1984, and unemployment falling to 4.5 per cent by year's end.

"One of the key takeways is the that Fed needs to see results in terms of economic growth, inflation and employment before they move to hike rates and not forecasts and that should support gold in the near-term," said Edward Moya, senior market analyst at Oanda.

The US dollar fell 0.5 per cent, making greenback-denominated gold cheaper for other currency holders.

"The one fly in the amber is that the bond market is so far not that impressed, which could help support the dollar and put a lid on the gold rally," Tai Wong, a trader at investment bank BMO in New York said, pointing to elevated US Treasury yields.

Benchmark yields remained high after the Fed projected a jump in economic growth with no rate hikes through 2023.

Gold is seen as a hedge against inflation, but rising Treasury yields have challenged that status as they translate into a higher opportunity cost of holding bullion.

Gold is less appealing to investors as yields are being driven by nominal rates instead of inflation expectations, TD Securities commodity strategist Daniel Ghali said.

Silver rose 1.3 per cent to US$26.30 an ounce, while platinum was steady at US$1,211.81.

Palladium rose 2.8 per cent to US$2,568.61, having hit an over one-year high of US$2,578.31 earlier.

REUTERS