Gold climbed above $1,130 an ounce in Europe on Wednesday as the US Federal Reserve's announcement that it will keep interest rates low for an "extended period" knocked the dollar. Spot gold was bid at $1,131.75 an ounce at 1038 GMT, against $1,124.70 late in New York on Tuesday.
US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $9.70 to $1,132.10 an ounce. The dollar came under pressure after the Fed stuck to its pledge to keep interest rates at current record lows. "As soon as the euro-dollar started moved towards $1.38, we saw currency factors," said Nick Moore, head of commodity strategy at RBS Global Banking & Markets.
Low interest rates also lessen the opportunity cost of holding gold, or the amount it costs investors to hold non-interest bearing bullion instead of other assets such as cash on deposit.
"As a non-yielding asset, obviously if interest rates remain near zero, gold can compete, but as soon as we see indications of tightening, it will be on the back foot," said Moore. On the physical markets, Indian gold buying softened in response to rising dollar prices after strong festival-related demand took it to one-week highs earlier.
Dealers say spring wedding-related demand is likely to emerge if prices decline further. "Any corrections to sub-$1,100 an ounce level would be bought as weddings are around the corner," said a dealer with a state-run bank in Mumbai.
Platinum meanwhile rose to two-month highs and palladium climbed as concerns over power shortages in South Africa boosted prices. The republic is the source of four-fifths of the world's platinum and is the second biggest palladium producer.
The platinum-gold ratio was at 1.44 on Wednesday and earlier this week matched the 18-month high of 1.46 it hit in January. Commerzbank said in note that on a historical basis, "the ratio is not particularly high, implying that platinum still has potential to catch up". Platinum was at $1,637.50 an ounce versus $1,633.50, while palladium at $475 versus $470. Among other precious metals, silver was at $17.55 an ounce versus $17.40.
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