Gold futures up 1% after Fed tempers rate hike expectations

Investing.com - Gold prices rose sharply on Thursday, as investors pushed back expectations for higher U.S. interest rates following the conclusion of the Federal Reserve's policy meeting.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery rallied $10.60, or 0.9%, to trade at $1,187.40 a troy ounce during European morning hours after hitting a session high of $1,188.40.

A day earlier, gold prices lost $4.10, or 0.35%, to close at $1,176.80. Futures were likely to find support at $1,171.90, the low from June 15, and resistance at $1,191.80, the high from June 10.

Also on the Comex, silver futures for July delivery jumped 19.1 cents, or 1.2%, to trade at $16.13 a troy ounce. Silver declined 1.8 cents, or 0.11%, on Wednesday to end at $15.94. Elsewhere in metals trading, copper for July delivery rose 2.2 cents, or 0.85%, to trade at $2.626 a pound.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.1% at 94.36, the lowest level since May 19.

Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

The dollar weakened across the board on Wednesday after the Fed lowered both its U.S. growth forecast and its interest-rate projections, prompting investors to push back expectations on the timing of an initial rate hike.

Fed Chair Janet Yellen said the central bank wanted to see “more decisive evidence” of sustained growth before raising rates, but acknowledged that the economy has “expanded moderately” after a weak first quarter.

A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn't offer investors any similar guaranteed payout.

Market players looked ahead to the release of key U.S. data later in the session for further indications on the strength of the economy and the future path of monetary policy.

The U.S. is to release a string of data, including reports on consumer prices, initial jobless claims and manufacturing activity in the Philadelphia region.

Meanwhile, investors continued to monitor developments surrounding talks between Greece and its international creditors, amid growing concerns that the country could default on its debt be forced out of the euro zone.

Europe wants Greece to make spending cuts in order to secure a deal that will unlock €7.2 billion in bailout funds and prevent Athens defaulting on its debts when its bailout expires at the end of the month.

European finance ministers were to hold talks in Brussels later Thursday, but expectations for a deal were not high. Failure to strike a deal would result in Greece defaulting on payments and exiting the euro zone.