Gold rallies after Fed says cautious on U.S. economic growth
New York (Mar 18) Gold prices surged more than 2 percent on Wednesday, on track for the biggest rally since January after the Federal Reserve signaled a more cautious outlook for U.S. economic growth, and the dollar tumbled.
The Fed opened the door further for an interest rate hike as early as June, ending its pledge to be "patient" in normalizing monetary policy.
Spot gold was up 1.6 percent at $1,166.90 an ounce at 2:35 p.m. EST (1835 GMT), after surging 2.2 percent to $1,173.40 per ounce, the highest since March 9.
U.S. gold futures for April delivery settled up 0.3 percent at $1,151.30 an ounce prior to the statement.
"The Fed is now on the launching pad at Cape Canaveral; however, whether the mission is Apollo 18 remains to be seen," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
The dollar fell 1.5 percent against a basket of currencies after the statement, helping to support gold prices, traders said.
Gold, a non-interest yielding asset, had dropped 3 percent since the start of the year on expectations for a U.S. rate rise.
While the U.S. economy has been strengthening, as evidenced by a firming labor market, the housing sector remained weak, suggesting that the Fed was unlikely to engage in an aggressive rate-rise cycle after an initial increase.
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, dropped 0.4 percent to 747.98 tonnes on Tuesday.
Platinum was down 0.3 percent at $1,088.15 an ounce, having earlier fallen to its lowest since May 2009 at $1,083.75 an ounce. The metal has fallen more than 8 percent since the start of the year and was trading at a discount of about $56 an ounce to gold, the widest spread since March 2013.
Silver was up 2.3 percent at $15.86 an ounce, while palladium rose 1.5 percent to $771.97 an ounce and platinum climbed 1.6 percent to $1,110.00.