Gold gains over 2% on weaker dollar, easing oil prices

The Fed raised rates on Wednesday and flagged more hikes in the coming months, with Chair Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration's inability so far to control inflation that policymakers worry could worsen.

Traders now see a 51% chance of another US rate hike when the central bankers meet next in October, compared with nearly 44% a day ago, according to the CME FedWatch tool. Although gold is considered an inflation hedge, a high-interest-rate environment reduces its appeal by boosting the attractiveness of interest-bearing assets.

"Rising fiscal deficits, higher debt burdens, an eventual weakening of the US dollar, and our expectation that the Fed will resume easing next year should support gold despite the near-term volatility," UBS said in a note.

The Bank of England held interest rates unchanged on Thursday, while the Bank of Japan is expected to raise rates to a 31-year high on Friday and signal its readiness to keep pushing up borrowing costs.

Spot silver XAG= rose 4.2% to $65.60 per ounce, platinum XPT= gained 1.8% to $1,783.69, and palladium XPD= climbed 1.6% to $1,289.45.