Gold hits one-week high as Fed signals only gradual rate hikes

U.S. stocks are rising after the government reported that prices paid by consumers increased in February a sign of potentially stro

Spot gold prices were up 0.1% at $1,227.11 per ounce by 8.38am, after hitting its highest since 6 March in the previous session at $1,233.13.

Gold prices held steady on Wednesday ahead of the outcome of a two-day Federal Reserve meeting, with the USA central bank widely expected to raise interest rates.

The Fed also released the FOMC members' latest interest rate forecasts, which suggested the US central bank is now expected to carry out two more interest rate hikes during this year for a total of three increases, unchanged from the previous outlook.

The result, along with the Fed statement, handed the euro its biggest one-day jump in nine months, with the single currency climbing above $1.07 for the first time since early February late on Wednesday and staying above that level, though a touch down on the day, in European trade on Thursday.

"On the retail side, you're making enough money on stocks that you're probably not as anxious about jumping back into gold".

"So even if we saw yesterday a reaction lowering the dollar on the back of unchanged forward guidance, the market still regards the dollar as a buy on dips as the outlook for the U.S.is actually ahead of other economies".

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"There is momentum as people start to look again how far they can push gold higher", said Georgette Boele at ABN AMRO.

However, with a slew of strong USA data in recent months having already been baked into prices, a global market has eased up in March, dented by concerns about Donald Trump's lack of movement on his promises to ramp up infrastructure spending and cut taxes.

"If infrastructure spending and tax cuts are being pushed further and further out, it gives the Fed more reason to be cautious", he said.

Rate rises lead to higher bond yields, which increase the opportunity cost of holding non-yielding bullion and tend to boost the dollar, in which gold is priced.

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.53 per cent to 839.43 tonnes on Wednesday.

Japanese market futures were lower than the Nikkei 225's last close at 19,577.38: Futures in Chicago were down 0.52 per cent at 19,475 and Osaka futures fell 1.05 per cent to 19,370. Palladium advanced 1.7% to US$776.90, after rising to US$779.30, it highest since March 1.

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