London: Gold on Thursday climbed the most in five weeks after the US Federal Reserve signaled that it will take a slow approach to raising interest rates. Gold gained one per cent to $1,196.85 in the global markets. The Bloomberg Dollar Spot Index slipped to a one-month low after the Fed on Wednesday cut its longer-term projections for US borrowing costs, while maintaining a forecast for the benchmark rate to rise by year-end.
In India, standard gold (99.5 purity) rose by Rs 150 to finish at Rs 26,780 per 10 grams from Wednesday’s closing level of Rs 26,630. Pure gold (99.9 purity) also spiked by a similar margin to end at Rs26,930 per 10 grams compared to Rs 26,780. Silver (.999 fineness) surged by Rs 400 to conclude at Rs37,790 per kg as against Rs 37,390 overnight. Following a two-day meet, Fed policymakers maintained the current near-zero interest rate for now and said a hike would be appropriate only after further improvement in the labour market and greater confidence that inflation would rise.
In their projections, Fed officials saw slightly lower rates at the end of 2016 and 2017 than forecast in March and more policymakers were now in favour of hiking rates only once or not all this year.
“All-in-all it there was a dovish tone to the release, with analysts likely to push back their expected timing of a rate hike,” said MKS Group precious metals trader James Gardiner.
The dollar languished at one-month lows early on Thursday. A softer greenback boosts dollar-denominated gold, while lower rates also support non-interest-paying bullion. The Fed statement implied that the pace of monetary tightening could be slower than the Fed had expected earlier, said HSBC analyst James Steel. Post Fed, “gold may have further room for corrective gains given that the Comex data showed a rise in speculative short positions”, he said, adding that short covering rallies tend to be short lived.
