Fed statement sends gold to two-week highs

Fed statement sends gold to two-week highs

19 March 2015, 09:38
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On Thursday gold price surged to a two-week high, as markets interpreted the Federal Reserve's statement as dovish.

In yesterday's statement following its monetary policy meeting, the US central bank downgraded its forecasts for growth and inflation and lowered its interest rate projections. Dropping a reference to being "patient" on the timing of rate hikes, the Fed added that the change in its forward guidance did not mean it has decided on the timing for an initial rate increase.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery hit a session high of $1,177.00 a troy ounce, the most since March 6, before trading at $1,166.90 during European morning hours, up $15.60, or 1.35%.

Yesterday gold tacked on $3.10, or 0.27%, to close at $1,151.30. Futures were likely to find support at $1,141.60, the low from March 17, and resistance at $1,200.00, the high from March 6.

Earlier in the week, the yellow metal declined to a four-month low of $1,141.60 amid concerns that the Federal Reserve will start raising rates as early as in June.

Yellen cautioned that the stronger dollar was acting as a drag on U.S. exports and was pushing down inflation.

The statement prompted investors to push back expectations on the timing and pace of future rate increases.

A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

In the meantime, silver futures for May delivery surged 34.4 cents, or 2.21%, to trade at $15.88 a troy ounce. On Wednesday, silver dipped 3.7 cents, or 0.24%, to close at $15.54. Copper for May delivery advanced 3.5 cents, or 1.34%, to trade at $2.605 a pound.

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