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Gold extended gains on Thursday as the dollar came under pressure after the Federal Reserve hinted that it may hike US rates later than market expectations and cut the economic growth forecasts.
Spot gold rose 0.2 per cent to $1,187.06 an ounce by 0320 GMT, after gaining 0.3 per cent on Wednesday.
Interest rates unchanged
Following a two-day meet, Fed policymakers maintained the current near-zero interest rate for now and said a hike would be appropriate only after further improvement in the labour market and greater confidence that inflation would rise.
In their projections, Fed officials saw slightly lower rates at the end of 2016 and 2017 than forecast in March and more policymakers were now in favour of hiking rates only once or not all this year.
“All-in-all it there was a dovish tone to the release, with analysts likely to push back their expected timing of a rate hike,’’ said MKS Group precious metals trader James Gardiner.
No clear signal
The dollar languished at one-month lows early on Thursday, as the Fed disappointed some who had hoped for a clearer signal on when the US central bank will lift interest rates. A softer greenback boosts dollar-denominated gold, while lower rates also support non-interest-paying bullion.
The Fed statement implied that the pace of monetary tightening could be slower than the Fed had expected earlier, said HSBC analyst James Steel.
Post Fed, “gold may have further room for corrective gains given that the recent COMEX data showed a rise in speculative short positions’’, said Steel, adding that short-covering rallies tend to be short-lived.
Hedge funds and money managers had slashed their net long stance in gold during the week ended June 9 and increased short positions, the most recent US Commodity Futures Trading Commission data showed.
US economic data
Markets are now eyeing more US data due later in the day for clues about the economy and how it would affect the Fed's monetary policy. Traders are also focusing on developments related to the Greek debt crisis.
Despite urgent pleas, including from the White House, there has been little sign of movement since talks between officials from Greece, the European Union, European Central Bank and the International Monetary Fund collapsed on Sunday.
The Bank of Greece said the country’s future in the European Union could be at risk without a debt deal with its creditors.
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