Gold advances on renewed rate cut bets after Fed verdict

Gold climbed over 1% on Wednesday after the U.S. Federal Reserve indicated they expect to reduce interest rates by three quarters of a percentage point by end-2024, sending the dollar and Treasury yields lower.

Spot gold rose 1.2% to $2,183.02 per ounce by 15:23 p.m. EDT (1923 GMT). U.S. gold futures settled 0.1% higher at $2,161.

The Federal Reserve held interest rates steady on Wednesday, but policymakers hinted they still expect to reduce them by three quarters of a percentage point by the end of 2024.

"Gold is getting a double dose of good news today; the Fed is still projecting three rate cuts this year and the higher interest rate projections moving forward betray a real concern that inflation will be harder to tame," said Tai Wong, a New York-based independent metals trader,

Wong added markets are modestly optimistic after the new dot plot maintains three 25 bps rate cuts this year.

Fed chair Jerome Powell said it is still likely in most people's view there will be rate cuts this year, but that it depends on data.

While gold is a traditional inflation hedge, lower interest rates encourage investment in non-yielding bullion.

Gold prices had dipped nearly 1% last week after hotter-than-expected February macroeconomic data indicated still persistent inflation, slashing rate-cut hopes.

Traders now price in a 73% chance of a June rate cut, versus a 65% chance seen before the Fed's rate decision.

The dollar index eased after the Fed verdict, making gold cheaper for overseas buyers, while Ten-year Treasury yields also declined.

"Gold is poised to try for new all-time highs with the Fed risk out of the way," Wong said.

Persistent safe-haven-demand, central bank purchases, geopolitical tensions continue to provide support.

"There has been demand from retail and other types of investors for gold in China," said David Wilson, commodities strategist at BNP Paribas.

Silver firmed 2.6% to $25.56. Platinum rose 1.7% to $909.35, palladium gained 3.1% to $1,022.50.