Gold Surges by 0.9% to $1,316.63/Ounce

Gold

Gold prices advanced on Thursday, May 3,  after the U.S. central bank reassured investors that increases to interest rates would be gradual, with geopolitical uncertainties also providing support.

Spot gold jumped for a second session, firming by 0.9 percent to $1,316.63 an ounce by 1225 GMT, while U.S. gold futures for June delivery added 0.9 percent to $1,317.30.

The U.S. Federal Reserve said that inflation on a 12-month basis was “expected to run near the committee’s symmetric percent objective”.

“Yesterday’s FOMC meeting didn’t spark much fireworks, butit eased concerns over whether the Fed was going to stick to its gradual tightening policy, which I believe they are,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“The key change is they added the word ‘symmetric’, which was taken as a sign that they would allow inflation to overshoot, which is positive for gold.”

Gold is highly sensitive to rising U.S. 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 were providing a supportive background for bullion, including U.S.-China trade talks and the potential U.S.withdrawal from the Iranian nuclear accord.

Meanwhile, gold demand has made its weakest start to a year since 2008, the World Gold Council said on Thursday, with stagnant prices and the threat of rising interest rates leading investors to seek better returns elsewhere, Reuters reports

Among other precious metals, spot silver  rose 1.1percent to $16.53 an ounce, platinum  climbed by 1.percent to $903.80 and palladium was up 1.2 percent at$971.20.