LONDON (Mar 19): Gold eased on Thursday from an earlier two-week high as the dollar recovered from its biggest daily fall in 18 months following a more cautious than expected interest rate statement from the U.S. Federal Reserve.
Spot gold rallied to a peak of $1,177.46 an ounce earlier in the session and the dollar tumbled after the U.S. Federal Reserve signalled a slower pace of interest rate hikes and gave a cautious outlook for the U.S. economy.
Gold failed to maintain those gains, however, as the dollar recovered from an early low to rise 0.6 percent against a currency basket. The U.S. unit extended gains after jobless data indicated the American labour market remained on a solid footing despite slowing economic growth.
Spot gold was down 0.2 percent at $1,164.80 an ounce at 1502 GMT.
Gold hit a four-month low this week and remains down nearly 2 percent on the year on expectations that higher interest rates could lift the opportunity cost of holding non-yielding bullion.
"Currently all precious metals are very sensitive to the U.S. dollar and U.S. interest rates, meaning prices move lower when the dollar and rates rise," ABN Amro analyst Georgette Boele said.
"The sharp sell-off yesterday in the dollar gave a temporary boost to precious metal prices, but the recovery signals that the dollar rally is far from over. A higher U.S. dollar will be a major negative driver for precious metals going forward."
While the U.S. central bank removed a reference to being "patient" on rates from its policy statement, it sounded a cautious note on the economic recovery. It also cut its median estimate for the federal funds rate and expressed concern over the strength of the dollar, up 10 percent this year.
U.S. gold futures for April delivery were up $13.70 an ounce at $1,165.00.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.24 percent to 749.77 tonnes on Wednesday - the first inflow since Feb. 20.
China's central bank on Thursday detailed plans on granting more licences for gold imports and exports, while maintaining that it could impose trade restrictions when necessary. A further opening up of the world's second biggest bullion market would underpin demand for the metal.
Silver was up 0.7 percent at $16.01 an ounce, while spot platinum was flat at $1,113.74 an ounce and spot palladium was down 1.5 percent at $768.50 an ounce.
Russia's central bank has agreed "in principal" to sell some of its palladium stock to a fund of investors led by Russia's Norilsk Nickel and two co-owners, Norilsk's Chief Executive Vladimir Potanin said on Thursday.