Gold holds overnight gains after Fed keeps rates steady

[BENGALURU] Gold held steady on Thursday, clinging to gains from the previous session when it rose 1.5 per cent to a two-week high on a weaker dollar after the US Federal Reserve left interest rates unchanged.

The Federal Reserve did say near-term risks to the US economic outlook had diminished, potentially leading to a resumption of monetary policy tightening this year. However, the Fed gave no indication whether it would raise rates at its next meeting in September.

Gold is sensitive to rising US rates, which would lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Spot gold eased a bit to US$1,338.56 an ounce at 0502 GMT. Bullion on Wednesday touched a high of US$1,342.18, its best since July 14.

US gold rose 0.9 per cent to US$1,338.50 an ounce after touching a session high of US$1,340.70.

The Fed decision was mostly on the expected lines, said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central, adding that he doesn't see the central bank raising rates before December.

"Moving forward, we don't see much changes in sentiments of what the Fed will do. They are unlikely to raise rates in September with the US Presidential elections due later this year."

Spot gold may end its current bounce around a resistance at US$1,346 per ounce, as suggested by its wave pattern and a Fibonacci retracement analysis, Reuters technical analyst Wang Tao said.

The dollar index, which tracks the greenback against a basket of six major rivals, fell 0.4 per cent to 96.637. Earlier this week, it had risen as high as 97.569, its highest level since March.

In the wider markets, Asian stocks edged up on Thursday after the Fed provided an positive assessment of the US economy and lifted risk sentiment.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares have seen an outflow of nearly 28 tonnes in the last three weeks.

Among other precious metals, palladium rose to a session high of US$706.60 an ounce, its best since Oct 12.

Palladium has soared 18 per cent so far in July, its best monthly performance in almost 8-1/2 years, as it catches up on gains made by other precious metals in the wake of the Brexit vote and benefits from greater demand for cyclical assets.

Platinum hit a fresh 14-month high on Thursday and was up 0.4 per cent at US$1,137.60 an ounce.

Silver, which soared about 3.7 per cent to a two-week high on Wednesday, was down 0.5 per cent to US$20.23 per ounce.

REUTERS