A Look at Gold as the Fed's Rate Hike Looms

A Look at Gold as the Fed's Rate Hike Looms

A Look at Gold as the Fed's Rate Hike Looms

On Wall Street, major U.S. equity indexes were modestly lower after gaining sharply on Wednesday in the wake of the U.S. Federal Reserve's rate decision.

USA stocks pushed higher on Wednesday, while Treasury yields fell and the dollar weakened, after the Federal Reserve raised interest rates for the second time in three months but did not flag any plan to accelerate the pace of monetary tightening.

With an immediate US rate increase seen as a done deal, investors are focusing on what message the central bank will deliver when it concludes a two-day meeting on Wednesday.

Prior to the Fed's decision, investors had been pricing in at least four rate hikes this year.

Prospects for higher rates have generally been dollar-positive and gold-negative as a richer buck makes gold less attractive to investors using another currency.

Spot gold had edged up 0.5 percent to $1,200.93 per ounce by 1040 GMT while US gold futures rose 0.1 percent to $1,200.90 per ounce.

"Some of that fear around Brexit, Trump, and then Wilders and (France's) Le Pen, may now be seeping out of the markets - you see some of that fear dissipating", said Arne Petimezas, analyst at AFS Group in Amsterdam, referring to far-right French presidential Marine Le Pen.

Sterling jumped after outgoing Bank of England policymaker Kristen Forbes unexpectedly voted for a rise in interest rates at the bank's March meeting.

MSCI's all-country world stock index gained 0.7 percent.

The dollar fell 1 percent against a basket of key currencies and hit a five-week low against the euro.

Oil prices eased as support from a weaker dollar was offset by a stubbornly high level of U.S. inventories.

Hours after the Fed's rate hike, China's central bank on Thursday raised short-term interest rates for the third time in as many months, a day after the end of the annual session of parliament where leaders warned that tackling debt risks would be a top policy priority this year.

"Real yields were pumped up ahead of the announcement in expectation of a hawkish hike, instead we got a dovish hike with no change in the forward guidance and that has led to some recovery in gold today", Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said.

UK's benchmark FTSE 100 closed down by 0.1 percent, the pan-European FTSEurofirst 300 provisionally closes up by 0.07 percent, Germany's Dax ended down by 0.1 percent, France's CAC finished the day up by 0.1 percent. The Australian dollar held steady at $0.7702, within sight of a three-week peak of $0.7720 touched on Wednesday.

The 10-year yield was at 2.5313 per cent from its last close of 2.524.

Brent crude was six cents lower at $51.75 a barrel.

Spot gold was up 0.2 percent at $1,229.40 an ounce by 2:53 p.m. EDT (1853 GMT), taking this week's gain so far to 2.1 percent.

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