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Gold holds gains after Federal Reserve says it will leave rates unchanged

[NEW YORK] Gold advanced on Wednesday as traders repositioned themselves after the Federal Reserve said it will keep target interest rates unchanged for the time being.

Prices held onto earlier gains after statements from the US central bank indicating that while it would leave rates unchanged, it was on track to lift borrowing costs again in December.

The Fed will leave rates unchanged at 1-1.25 per cent. Gold is highly sensitive to rising US interest rates, as these lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Spot gold was 0.4 per cent higher at US$1,276.37 an ounce by 3.26pm EDT (1926 GMT) , having earlier peaked at US$1,280.87. Its upward move accelerated after it broke through its 100-day moving average at US$1,275 an ounce, a key chart level.

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US gold futures for December delivery settled up US$6.80, or 0.5 per cent, at US$1,277.30 per ounce.

"The price action in gold was most likely positioning reversals. We saw some shorts cover and then the market came back," said Daniel Ghali, commodities strategist for TD Securities in Toronto.

The latest Fed statement came a day ahead of confirmation of a new chair, likely replacing incumbent Janet Yellen. Fed Governor Jerome Powell is widely seen as the favourite to take over next year. He is considered less hawkish and therefore more bullish for gold than his main challenger.

Gold prices have recovered from Friday's three-week low, but they remain within a less than US$15 an ounce range.

"Coming closer to the end of the year and two FOMC meetings in a month and half, which could determine the direction of monetary policy, is what has been keeping gold rangebound," Capital Economics analyst Simona Gambarini said.

Wall Street held onto modest gains on Wednesday, while the dollar recovered against a basket of major currencies. Oil prices retreated.

Traders also awaited US President Donald Trump's tax plan, which Republicans plan to release on Thursday morning.

Elsewhere, silver rose 2.7 per cent to US$17.148, after reaching US$17.195, the strongest since Oct 20, while platinum climbed 2.06 per cent to US$934.10 an ounce after touching US$937.30, the highest since Oct 16.

Palladium surged 2.2 per cent at US$1,001.75 an ounce, the strongest since Oct 16.

The metal rose nearly 5 per cent in October and touched a 16-year peak of US$1,010.50 an ounce mid-month.