Gold prices rose to 1-1/2-week highs on Wednesday, extending gains after the US Federal Reserve held interest rates unchanged but sent a strong signal for monetary policy tightening before the end of 2016. "The case for an increase in the federal funds rate has strengthened," the US central bank said in a statement following a two-day policy meeting. Spot gold was up 1.2 percent at $1,330.08 an ounce by 2:58 pm EDT (1858 GMT), after rising to $1,335.01 an ounce, the highest since September 9.
US gold futures settled up 1 percent at $1,331.40 prior to the release of the Fed statement. "Gold rallies the most in two weeks as a timorous majority managed to impose its will over three dissenters," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
"Gold is being bought as the market considers that the Fed now has three months to find an excuse to skip even a December hike and a realization 2017's voting Fed Presidents are much more dovish than the current group." Gold was already firm in earlier trade, along with stock markets, after the Bank of Japan overhauled its monetary policy framework, switching to targeting interest rates and side lining more than three years of massive money printing.
"It provided a bit of a lift to gold as well as well as other assets, but certainly we are going to be more or less on hold until we see the Fed statement later," analyst Tom Kendall at ICBC Standard Bank in London said. In other precious metals, spot silver gained 2.4 percent at $19.72 an ounce. Platinum climbed 2.3 percent at $1,049.20 and palladium rose 0.2 percent at $682.50.