November 1, 2017 / 3:18 PM / a year ago

PRECIOUS-Gold holds gains after Fed says it will leave rates unchanged

    * Fed keeps target interest rate at 1-1.25 percent
    * Gold holds onto gains after Fed statement
    * GRAPHIC-2017 asset returns:

 (Recasts, updates prices; adds comment, NEW YORK dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Nov 1 (Reuters) - Gold advanced on
Wednesday as traders repositioned themselves after the Federal
Reserve said it will keep target interest rates unchanged for
the time being.
    Prices held onto earlier gains after statements from the
U.S. central bank indicating that while it would leave rates
unchanged, it was on track to lift borrowing costs again in
    The Fed will leave rates unchanged at 1-1.25 percent. Gold
is highly sensitive to rising U.S. interest rates, as these lift
the opportunity cost of holding non-yielding bullion, while
boosting the dollar, in which it is priced.
    Spot gold        was 0.4 percent higher at $1,276.37 an
ounce by 3:26  p.m. EDT (1926 GMT) , having earlier peaked at
$1,280.87. Its upward move accelerated after it broke through
its 100-day moving average at $1,275 an ounce, a key chart
    U.S. gold futures        for December delivery settled up
$6.80, or 0.5 percent, at $1,277.30 per ounce. 
    "The price action in gold was most likely positioning
reversals. We saw some shorts cover and then the market came
back," said Daniel Ghali, commodities strategist for TD
Securities in Toronto.
    The latest Fed statement came a day ahead of confirmation of
a new chair, likely replacing incumbent Janet Yellen. Fed
Governor Jerome Powell is widely seen as the favorite to take
over next year. He is considered less hawkish and therefore more
bullish for gold than his main challenger.      
    Gold prices have recovered from Friday's three-week low, but
they remain within a less than $15 an ounce range.
    "Coming closer to the end of the year and two FOMC meetings
in a month and half, which could determine the direction of
monetary policy, is what has been keeping gold rangebound,"
Capital Economics analyst Simona Gambarini said.
    Wall Street held onto modest gains on Wednesday, while the
dollar recovered against a basket of major currencies. Oil
prices retreated.                                      
    Traders also awaited U.S. President Donald Trump's tax plan,
which Republicans plan to release Thursday morning.             
    Elsewhere, silver        rose 2.7 percent to $17.148, after
reaching $17.195, the strongest since Oct. 20, while platinum
       climbed 2.06 percent to $934.10 an ounce after touching
$937.30, the highest since Oct. 16.
    Palladium        surged 2.2 percent at $1,001.75 an ounce,
the strongest since Oct. 16.
    The metal rose nearly 5 percent in October and touched a
16-year peak of $1,010.50 an ounce mid-month. 

 (Additional reporting by Vijaykumar Vedala in Bengaluru and
Eric Onstad in London; Editing by David Evans and Tom Brown)
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