Gold prices gained on Thursday, one day after the US central bank reassured investors that increases to interest rates would be gradual and as the US dollar softened, with geopolitical uncertaiinties also providing support Investors are awaiting US jobs data expected on Friday for a sense of the country's economic performance that could help influence the US Federal Reserve's pace of increasing interest rates.
Spot gold rose 0.6 percent at $1,312.54 per ounce by 1:33 pm EDT (1733 GMT), while US gold futures for June delivery settled up $7.10, or 0.5 percent, at $1,312.70 per ounce. The greenback was little changed, but seeped into negative territory in a choppy trading session as investors took profits. The Fed said inflation on a 12-month basis was "expected to run near the committee's symmetric 2 percent objective".
The statement showed the Fed will let inflation overshoot, said Chris Gaffney, president of world markets at EverBank. "What's boosted prices is the expectation that inflation will be allowed to run up a little higher and rates are not going to chase it." Slowing the pace of interest rate increases would be positive for gold. Bullion is highly sensitive to rising US interest rates because it becomes less attractive compared with interest-bearing assets. Julius Baer economists expect the Fed to shift its guidance to four rate hikes this year, from three, which will weigh on gold, said Carsten Menke, commodities analyst at the Swiss bank.
"Rising rates and a temporarily stronger dollar should bring sufficient headwinds to push prices below $1,300 over the coming months," he added.
Uncertainties supported bullion, including US-China trade talks and the potential US withdrawal froom the Iranian nuclear accord Gold demand has made its weakest start to a year since 2008, the World Gold Council said, with stagnant prices and the threat of rising rates leading investors to seek better returns elsewhere.
Among other precious metals, spot silver rose 0.6 percent at $16.45 an ounce, earlier hitting a one-week high at $16.59. Platinum climbed 1.1 percent at $899.49 an ounce and palladium increased 0.6 percent at $965.