Gold prices steadied on Friday, holding firm near a six-month high struck in the previous session, as the US dollar remained under pressure due to a subdued outlook towards USA interest rates and the economy, and investors shunned risky assets.
The Federal Reserve's tightening regime, which as of Wednesday, Dec. 19 th included four interest rate hikes this year, is widely viewed as one of the major factors hindering gold and gold exchange traded funds this year.
Spot gold climbed 1.2 percent to $1,258.08 per ounce by 11:32 a.m. ET, having reached $1,262.01 earlier in the session, a peak since July 9.
The Fed's commitment on Wednesday to retain the core of its plan to tighten monetary policy, despite rising uncertainty about global economic growth, rattled stock markets and pressured the dollar, making USA currency-denominated gold more appealing for non-U.S. investors.
United States gold futures declined 0.3 per cent to $1,252.80 per ounce on Thursday.
In the wake of the Fed announcement, US stocks declined sharply on Wednesday, with both the Dow Jones Industrial Average and the Standard & Poor's 500 index falling about 1.5 percent. "They did say they would increase interest rates, but would be more patient in doing so", said Brian Lan, managing director at dealer GoldSilver Central in Singapore. "It can still turn quite negative, so this is why gold remains a good hedge against a lot of market risks", said Stephen Innes, APAC trading head at OANDA in Singapore. Lower interest rates also tend to weigh on U.S. yields and the dollar, in which gold is priced. For the past three years rate futures traders have expressed scepticism the Fed would deliver as many rate hikes as promised.
Much of the near-term thesis for gold revolves around the Fed's plans for interest rates.
Asian shares retreated on Thursday from their previous session's declines.
As investors flocked to the safety of government bonds, USA benchmark Treasury yields fell to more than eight-month lows on Wednesday.
"Gold seems vulnerable for the remainder of the year, although the absence of fresh fodder driving the Fed outlook narrative will probably keep trend progression modest", said Ilya Spivak, a currency strategist for DailyFX. Meanwhile, spot palladium rose 2 percent to $1,268.50 per ounce, just below a record high of $1,269.50 hit earlier this week.
Platinum fell 0.3 to $787.80 per ounce.