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LONDON – Gold climbed more than 2 percent yesterday after the US Federal Reserve said it would take a patient approach toward raising interest rates, lifting stock markets and commodities while putting a damper on the dollar.Fed chairwoman Janet Yellen said the Fed was unlikely to hike rates for “at least a couple of meetings”, meaning April of next year at the

earliest.
Rising US interest rates increase the opportunity cost of holding non-interest-bearing assets such as gold, and also lift the dollar, in which the metal is priced. The dollar fell against a basket of currencies yesterday.

Spot gold was up 1,8 percent at $1,209,46 an ounce by 10.43AM GMT. On Wednesday, it fell as far as $1 183,73, its lowest since December 1.

A break of stops above $1,200 per ounce sparked a rally in gold in early European trade, said Afshin Nabavi, head of trading at MKS, sending prices to a peak of $1,212,80 per ounce.

“The Fed left themselves lots of room going forward, depending on the (economic) figures,” he said.

US February gold was up 1,3 percent to $1,209,90 per ounce. Other precious metals also advanced, with spot silver up 3,2 percent to $16,19 per ounce.

European stocks rose 1,9 percent and eurozone bond yields fell after the Fed altered a pledge to keep rates near zero for a “considerable time”, but struck a more cautious tone than many had expected as the US mulls its next rate rise. “The Fed did a good job yesterday of slowly distancing themselves from the ‘considerable’ forward guidance, without upsetting local equity markets,” Dutch bank ING said in a note.

On the currency market, the dollar index was down 0,2 percent after the Fed statement, while the Swiss franc hit its lowest against the dollar in more than two years after the Swiss National Bank said it would introduce negative interest rates.

Gains in gold are likely to be limited, however, as expectations remain that rates will rise next year. Economists at Wall Street’s biggest banks are still convinced the Fed will lift rates by next June. “With the prospect of rate rises next year and commodities on the whole somewhat out of favour, the upside is also limited,” Marex Spectron said in a note.

Among other precious metals, spot platinum was up 2,2 percent at $1,212,60 per ounce, while palladium was up 1,8 percent at $789,63 per ounce. – Reuters