Gold rose for a second day on Thursday, hitting a six-week high as the dollar dropped to a 13-month low after the U.S. Federal Reserve indicated it would keep to a slow path of monetary tightening.     

The Fed’s statement followed a two-day policy meeting that ended on Wednesday where the central bank kept interest rates unchanged but expected to start winding down its massive holdings of bonds “relatively soon”.                 

The decline in the greenback is a boon for dollar-denominated gold since it makes buying the metal less expensive for investors paying in other currencies.    

“We think that gold has turned something of a corner and may now be in a position to retest its recent highs,” said INTL FCStone analyst Edward Meir.    

“With the Fed now likely on hold at least till the end of the year and U.S. bond yields falling, there are some forming tailwinds that should propel prices higher over the short term,” Meir said.    

Spot gold had climbed 0.2 percent to $1,262.78 per ounce at 0630 GMT. It reached $1,264.90 an ounce earlier in the session, its highest since June 15.    

U.S. gold futures for August delivery advanced 1.1 percent to $1,262.50 per ounce.    

On Thursday, the dollar index, a measure of the greenback against a basket of six major currencies, was at a 13-month low, while U.S. Treasury prices gained after the Fed’s policy statement was perceived to be dovish.                

“Investors have gradually priced in the whole event and considering that the Fed sees the near-term risk of the economy is neutral, I don’t think the market will expect a third rate hike in the foreseeable future or at least in this quarter,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group. 

“So, gold investors have reason to be bullish just a little bit.”   

Source: Reuters UK