Gold at 4-week high following Fed meeting
Gold rose to a four-week high on Thursday following signals of continued low interest rates in the US, bolstered by weaker than expected economic data in the country.
The yellow metal closed at US$1,293/oz in London, up US$25.50 on the previous day, after the US Federal Open Market Committee (FOMC) said interest rates will be kept low for some time.
The announcement came as a surprise to some investors who had sold off holdings in the metal ahead of the meeting, expecting the Fed to up rates.
Higher interest rates tend to have a weakening effect on gold as investors seek alternative investments with higher yield returns, Dow Jones reported.
The FOMC also said it will continue to add to its holdings of agency mortgage-backed securities, although at a slower pace of US$15bn per month, rather than US$20bn currently, and will continue purchases of longer-term treasury securities at US$20bn per month, rather than US$25bn.
Another positive for gold came from US economic data, with the Conference Board (CB) leading economic index showing a 0.5% increase in May.
While CB economist Ataman Ozyildirim said the results point to an expanding economy and a potential pick up in pace in the second half of the year, the figures were lower than many expected.
"Gold has gained additional upside momentum today off a falling dollar following Fed chair Janet Yellen's confirmation of the US Federal Open Market Committee's dovish stance, which anchored the raising of the long-term interest rate to next year, further aided by a weaker-than-expected CB leading index reading," FastMarkets analyst Tom Moore said.
Concerns over security in Iraq have lifted gold in recent days, and fears continued after Sunni militants clashed with government forces over control of the country's biggest oil refinery.
Silver also increased to US$19.94/oz in London, up from US$19.55/oz the previous day and at its highest for more than two months.
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