Gold climbs as Fed cuts outlook for interest rate rises | Reuters - Firstpost
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Gold climbs as Fed cuts outlook for interest rate rises | Reuters

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LONDON Gold rose on Thursday, building on a 2.5 percent rally in the previous session after the Federal Reserve cut the number of interest rate rises it forecasts for this year, sending the dollar sharply lower.

The U.S. central bank held interest rates steady and indicated it would tighten policy this year, but fresh projections showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.

Spot gold was up 0.3 percent at $1,266.01 an ounce at 1445 GMT, while U.S. gold futures for April delivery were up 3 percent at $1,266.90.

Expectations the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns over global growth and the outlook for the Chinese economy roiled financial markets.

Wednesday's statement suggested the Fed remained cautious on the potential risks posed by an uncertain global economy.

"It was expected that the Fed wouldn't raise rates, (but) the tone sounded less optimistic than the market had thought," Natixis analyst Bernard Dahdah said.

Gold has climbed nearly 20 percent since the end of last year as investors scaled back their expectations the Fed would continue to push rates higher.

Rising rates tend to pressure gold by lifting the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

World shares rose to their highest of the year on Thursday, while the dollar slid 1.2 percent against a basket of currencies.

While that is supporting gold, it has failed to revisit last week's 13-month high of $1,282.51 an ounce. Further gains could prove elusive without further stimulus, analysts said.

"There has been a general tendency for gold to react in a Pavlovian manner to every announcement from the Federal Reserve, with the price firming on any failure to raise rates, so the initial jump is not too surprising," Glaux Metal consultant David Jollie told the Reuters Global Gold Forum on Thursday.

"I also think we shouldn't expect too much strength immediately after this announcement, since not that many people thought rates would rise again at this point. They key questions are rather what is going to happen to inflation and when might rates rise later this year."

Among other precious metals, silver was up 2.6 percent at $15.98 an ounce, while platinum was up 1.4 percent at $990.05 and palladium was up 1.8 percent at $590.

(Additional reporting by Naveen Thukral in Singapore; Editing by David Goodman and Mark Potter)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Mar 17, 2016 22:13 IST

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