March 16, 2017 / 10:45 AM / in 4 months

PRECIOUS-Dovish Fed, weaker dollar lifts gold to 1-week high

3 Min Read

    * Cautious Fed sends dollar to 5-week low
    * Dutch election relief curbs safe haven interest
    * Silver, PGMs climb to one-week highs

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, March 16 (Reuters) - Gold rallied for the
second straight session on Thursday, climbing to its highest
level in over a week after the U.S. central bank signaled only
gradual rate tightening and the dollar slid to its lowest in
five weeks.
    Spot gold        gained 0.7 percent at $1,227.43 an ounce by
3:03 p.m. EDT (1903 GMT), after touching $1,233.13, the highest
since March 6. U.S. gold futures         for April delivery
settled up 2.2 percent at $1,227.10.
    The Federal Reserve on Wednesday raised U.S. interest rates
for the second time in three months, as expected, but did not
flag any plan to accelerate the pace of monetary tightening as
some investors had anticipated.              
    "I think people were betting on a dot plot and a Fed
statement that was more hawkish than what we got," said Trey
Reik, senior portfolio manager for Sprott Asset Management USA.
    The dollar index        hit a five-week low on the back of
the Fed announcement.        
    "Real yields were pumped up ahead of the announcement in
expectation of a hawkish hike, instead we got a dovish hike with
no change in the forward guidance and that has led to some
recovery in gold today," Ole Hansen, head of commodity strategy
at Saxo Bank in Copenhagen, said.
    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.    
    "At the same time we had the election in Holland, which
didn't increase the political risk in Europe and is acting as a
bit of a counter measure to the rally in gold," Hansen added.
    Dutch center-right Prime Minister Mark Rutte fought off the
challenge of anti-Islam and anti-EU rival Geert Wilders to score
an election victory that was hailed across Europe on Thursday by
governments facing a rising wave of nationalism.              
    "That's a real strong vote in investors' minds that the
euro's not about to collapse anytime soon," Sprott's Reik said.
    Meanwhile, inflows of holdings of SPDR Gold Trust      , the
world's largest gold-backed exchange-traded fund, so far this
week have already nearly erased last week's outflows.          
    In other precious metals, spot silver        rose 0.05
percent to $17.31 per ounce, after hitting its highest in a week
at $17.56.
    Platinum        climbed 0.8 percent at $957 per ounce,
having touched $971.60, its highest since March 7. 
    Palladium        gained 0.2 percent at $764.70 per ounce
after hitting a week high of $774.70. 

    
 (Additional reporting by Arpan Varghese and Nallur Sethuraman
in Bengaluru; Editing by Susan Fenton and Grant McCool)
  

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