Gold rises over 1pct as investors digest Fed hike, oil rally stalls

NEW YORK: Gold prices rose more than one per cent on Thursday as investors digested the US Federal Reserve's interest rate hike and its signal that further policy tightening may follow, while an earlier rally in oil prices lost momentum.

Spot gold was up 1.1 per cent at US$4,310.49 per ounce, as of 0149 GMT, after hitting a near six-week low on Wednesday.

US gold futures for December delivery were down roughly one per cent at US$4,348.70.

Oil prices fell, extending losses from the previous session, as reports of Saudi Arabia offering extra crude cargoes through Oman reduced fears of supply disruptions.

"Oil prices remain a key factor to watch. If oil prices continue to decline, that could support gold prices moving higher, at least from a medium-term perspective. Until that materializes, I expect gold to remain range-bound," said Kelvin Wong, senior market analyst at OANDA.

The current uptick in gold is also largely driven by technical factors, with the Fed's hawkish message already largely priced into the market, he added.

Although gold is considered an inflation hedge, higher rates reduce its appeal by boosting the attractiveness of interest-bearing assets.

The Fed raised interest rates on Wednesday and flagged more hikes in the coming months, with new US central bank chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration's inability so far to control inflation that policymakers worry could worsen.

Updated quarterly economic projections showed 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year, with only two of them seeing rates remaining stable from here.

The Bank of England looks set to keep rates on hold on Thursday but investors are watching for any hint that higher energy prices could force it to follow the Fed's example.

In the Middle East, Saudi warplanes pounded Yemen, the Houthis said, as the Iran-backed fighters solidified their gains after a lightning advance.

Spot silver rose 1.4 per cent at US$63.83, platinum firmed 1.6 per cent to US$1,780.55 and palladium climbed 2 per cent to US$1,295.00.