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PRECIOUS-Gold hits highest in nearly 2 years after Fed's cautious outlook

Published 16/06/2016, 05:17 pm
© Reuters.  PRECIOUS-Gold hits highest in nearly 2 years after Fed's cautious outlook
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* Dollar hits 21-mth low against yen

* Silver trades at six-week high (Adds comment, updates prices)

By Vijaykumar Vedala

BENGALURU, June 16 (Reuters) - Gold jumped to its highest in nearly two years on Thursday, after the U.S. Federal Reserve indicated it could be less aggressive in tightening monetary policy next year.

Spot gold XAU= had climbed 1.7 percent to $1,312.55 an ounce by 0648 GMT, after touching its highest since August 2014 at $1,313.60.

U.S. gold GCcv1 rose 2.2 percent to $1,316.30, after marking its strongest level since last August at 1,316.80.

The Fed kept interest rates unchanged on Wednesday and signalled it still planned to raise rates twice in 2016, though it said slower economic growth would crimp the pace of monetary policy tightening in future years. is sensitive to interest rate hikes, which increase the opportunity cost of holding the non-interest yielding metal.

The bullish impact of the FOMC's decision to leave rates unchanged and the tone of the statement are near-term gold bullish, HSBC analyst James Steel said in a note.

"But the impact may be limited as the market had already largely ruled out a near-term rate rise and we do not believe the following Fed statement was outside of expectations," he said, adding the central bank's policy was shaping up to be long-term supportive of gold.

A small majority of Wall Street's top banks expects the Fed to raise interest rates no more than once this year, results of a Reuters poll showed on Wednesday. Fed's cautious stance comes ahead of a referendum in Britain on June 23 on whether it would exit the 28-member European Union. The move dubbed Brexit could tip Europe back into a recession, putting more pressure on the global economy and boosting the safe-haven appeal of bullion.

"The Fed's outlook was surprising since the U.S. economy has been doing relatively well compared to the rest of the world. The market will now monitor the Brexit situation more closely," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

"The next level gold is expected to see is $1,325," he added.

Asian stocks turned lower on Thursday, while the dollar slid to a 21-month low against the yen after the Bank of Japan refrained from taking further stimulus steps, hours after the Fed's review. MKTS/GLOB USD/

Holdings in SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, rose 0.23 percent to 900.75 tonnes on Wednesday, the highest since October 2013. GOL/ETF

Spot silver XAG= climbed as far as $17.86, its strongest since May 2, before trading 2-percent higher at $17.85 per ounce.

Among other precious metals, spot platinum XPT= gained 1.6 percent to $986.30 per ounce and spot palladium XPD= climbed 1 percent to $537.22 per ounce.

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