Gold price hits 1-wk high as Fed signals only gradual rate hikes

London (Mar 16)  Gold hit a one-week high on Thursday after the U.S. Federal Reserve signaled a cautious stance on interest rate policy this year, pushing the dollar to its lowest in a month.

The Fed on Wednesday raised interest rates for the second time in three months, with officials sticking to their outlook for two more rate hikes this year and three more in 2018.

Fed Chair Janet Yellen said that the central bank would stick to a gradual path of interest rate rises even if inflation runs above its 2 percent target.            

Spot gold had risen 0.6 percent to $1,226.21 per
ounce at 0623 GMT after touching $1,226.95, the highest since
March 7, earlier in the session. U.S. gold futures         for
April delivery were up 2.1 percent at $1,226.3 an ounce.   
     "Yellen reiterated that future rate increases would be
'gradual', with this key word bestowing a dovish tone to the
outlook," said INTL FCStone analyst Edward Meir.
    Gold is highly sensitive to rising U.S. interest rates, as
these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
    Recent rate hikes have seen gold decline in the run-up to an
increase, before recovering in its wake. Gold slumped to a
10-month low in mid-December after rates were increased for the
first time in a year, before turning around to post its
strongest increase in seven months in January.
    The dollar index        was down 0.2 percent at 100.74,
having earlier touched a one-month low.
    The euro strengthened against the U.S. currency after early
returns showed the Netherlands' centre-right Prime Minister Mark
Rutte had roundly seen off a challenge by anti-Islam, anti-EU
Geert Wilders in an election on Wednesday, a huge relief to
other EU governments facing a wave of nationalism.            
    "The market will be looking at the French election coming up
relatively soon," ANZ analyst Daniel Hynes said. "However, we
would need to see the far right in particular really gather
strong resolve from those elections to see gold prices being
pushed even higher."
    Meanwhile, holdings of SPDR Gold Trust      , the world's
largest gold-backed exchange-traded fund, rose 0.53 percent on
Wednesday.         
    Inflows into the fund so far this week have already nearly
erased last week's outflows.
    In other precious metals, spot silver        climbed 0.8
percent to $17.43 per ounce, after hitting its highest in a week
at $17.48 earlier in the session.
    Platinum        was up 1.68 percent at $964.99 per ounce,
close to $969.60, its highest since March 7, marked earlier in
the day.
    Palladium        advanced 1.1 percent to $771.50 per ounce.

Source: Reuters