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PRECIOUS-Gold at 1-week high, Fed shows no sign of speeding up rate hikes
March 15, 2017 / 11:09 AM / 8 months ago

PRECIOUS-Gold at 1-week high, Fed shows no sign of speeding up rate hikes

    * Fed holds planned pace of monetary tightening
    * Dutch elections provide safe-haven support
    * SPDR Gold holdings rise for second straight session

 (Rewrites throughout to include Fed statement, updates prices;
adds comment, second byline, NEW YORK dateline)
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/LONDON, March 15 (Reuters) - Gold rallied more than
1.5 percent to a one-week high on Wednesday, as the U.S. Federal
Reserve called for gradual monetary tightening after raising
interest rates by an expected 25 basis points for the second
time in three months.
    The central bank said in its policy statement that further
hikes would only be "gradual," with officials sticking to their
outlook for two more rate hikes this year and three more in
2018.             
    The U.S. dollar index        fell to a two-week low, helping
lift gold which is denominated in dollars and so became cheaper
for holders of other currencies, while the 10-year Treasury
yields             tumbled and U.S. stock markets extended
gains.            
    Spot gold        was up 1.6 percent at $1,217.81 an ounce by
3:01 p.m. EDT (1901 GMT), after rising to $1,219.36, the highest
since March 7. It was on track for its biggest one-day jump
since September.
    U.S. gold futures        , which closed ahead of the Fed
statement, settled down 0.2 percent at $1,200.70. 
    "After loitering around $1,200 for most of the session, gold
surged smartly higher after the FOMC only lifted its weighted
projections by a marginal 9 basis points in 2018 and 2019," said
Tai Wong, director of base and precious metals trading for BMO
Capital Markets in New York.
    "The Fed seems clearly happy to be an indulgent parent
couching the rate hike in the gentlest terms possible."
   Gold is highly exposed to interest rates, as rising rates
lift the opportunity cost of holding non-yielding bullion.
   "The wording in the statement was only marginally changed to
reflect the fact that underlying inflation remains slightly
below 2 percent, and that there have been signs of somewhat
firmer business fixed investment in the first quarter," said
Royce Mendes, director and senior economist at CIBC Capital
Markets in Toronto. 
    Investors were also focusing on Wednesday's elections in the
Netherlands, which have been boosting gold's safe-haven appeal. 
Some said looming Brexit talks also added to the geopolitical
risk.             
    Gold prices have fallen more than 5 percent since the
precious metal failed to sustain a break above its 200-day
moving average at around $1,261 in late February.
    Silver        rose 2.3 percent at $17.22 an ounce.
    Platinum        was up 2 percent at $951 per ounce while
palladium        was up 2.2 percent at $760, after tapping a
10-week low.

    
 (Additional reporting by Nallur Sethuraman in Bengaluru;
editing by Susan Fenton and Chizu Nomiyama)
  

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