Gold jumped to a 25-year high above $704 an ounce on Wednesday as a weak dollar prompted fresh buying, while investors lifted platinum to a record peak.
After gold was closed, the Federal Open Market Committee raised the key federal funds rate by 25 basis points for the 16th straight time, taking the key rate to 5 percent.
Gold briefly fell about $2 in New York spot trading, while the dollar rose a bit as the Fed's statement was seen as less dovish as it might have been.
Spot gold rose as high as $704.50 and later was quoted at $701.00/702.00 an ounce after the Fed's decision, versus Tuesday's New York close at $699.90/700.90.
The dollar earlier hit one-year lows against European currencies. The greenback has been under pressure for weeks due to doubts about its outlook.
Jeffrey Christian, managing director of research firm CPM Group, said dollar softness has bolstered gold because investors are seeking a greenback alternative more and more.
"You're finding a lot of uncertainty and volatility in the currency markets and that's good for the precious metals," he said.
"You're seeing a lot of buying on the dips as opposed to profit taking," Christian said, adding that upside targets in gold would now likely be at $50 increments.
Bullion set a record high at $850 in January 1980.
Sharp gains in gold in recent weeks have left prices vulnerable to deep corrections lower, but dealers saw no big sell-off in the immediate future.
"The weakness in the dollar is likely to continue. Overall uncertainty in the macro-economic environment over global imbalances, particularly in the US, is keeping interest (of investors) in the gold market," a precious metals analyst in London said.
Gold has risen more than 35 percent this year, and 57 percent since the start of last year, as investors diversify into precious metals as a hedge against global tensions, including those over US-Iran relations, high energy prices and uncertainty about the dollar.
Traders said reports that economists had urged China to quadruple its gold reserves to 2,500 tonnes from the current 600 tonnes had also spurred the rally on Tuesday.
China, the biggest holder of foreign exchange reserves at more than $875 billion, is the third-largest gold consumer in the world. But some dealers doubted China's central bank would buy gold at high prices.
"We've been talking about China increasing its reserves for half a year and I doubt it that it's going to happen. People made use of this to push up the price last night," said a dealer in Hong Kong.
Platinum spiked to a record high of $1,265 an ounce before moving to $1,253/1,258, against $1,235/40 on Tuesday.
Dealers said platinum's rise was driven by the view that Johnson Matthey, the world's top distributor of the metal, will produce a bullish report on the market next week.
The company will release a report to coincide with a platinum industry event in London that starts on May 15.
Palladium rose to a four-year high of $394 an ounce before falling to $387/392, versus $389/394. Silver fell to $14.20/14.30 an ounce, versus $14.44/14.54.
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