The Bank of England held interest rates unchanged on Thursday, while the Bank of Japan is expected to raise interest rates to a 31-year high on Friday and signal its readiness to keep pushing up borrowing costs.
Spot silver XAG= rose 3.9% to $65.44 per ounce, platinum XPT= gained 2.1% to $1,787.68 and palladium XPD= climbed 2.2% to $1,296.86.
Fed outlook and rate expectations
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. FEDWATCH
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.
Gold rebounds on softer dollar and lower oil prices
Sept. 17 (Reuters) - Gold gained more than 2% on Thursday, rebounding from the previous session’s near six-week low, supported by easing oil prices and a lower US dollar, while investors assessed the latest Federal Reserve rate hike and policy cues.
Spot gold XAU= was up 2.4% at $4,364.29 per ounce, as of 9:11 a.m. EDT (1311 GMT). US gold futures GCcv1 for December delivery rose 0.4% to $4,404.80.
Lower energy prices and Treasury yields support bullion
"We've been tied very closely to an inverse relationship with energy prices based on those inflationary pressures ... Energy prices are down fairly dramatically today. So it's these lower energy prices that are removing some of that pressure on the gold market," said David Meger, director of metals trading at High Ridge Futures.
Oil prices extended their fall into a second straight day to a one-week low on diminishing fears of supply disruptions, while the dollar eased from a seven-week high, making greenback-priced bullion more affordable for holders of other currencies.
The yield on the benchmark 10-year U.S. Treasury US10YT=RR also slipped. High yields on risk-free U.S. Treasuries dampen the appeal of the non-yielding metal.
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