March 17, 2016
Gold Eases After Strong Rally, Fed Eyes Fewer Rate Hikes
(Reuters) - Gold ticked lower on Thursday as the market took a breather after rallying 2.5 percent in the previous session following the Federal Reserve's decision to cut the number of planned interest rate hikes, adding to pressure on the dollar.
Gains in Asian stock markets and U.S. crude oil futures took their toll on the precious metal's safe-haven appeal.
Spot gold had slid 0.6 percent to $1,255.07 an ounce by 0236 GMT, after notching up its biggest one-day rally in five weeks on Wednesday to a high of $1,264 an ounce.
U.S. gold jumped 2.1 percent to $1,256.1 an ounce, having settled down 0.1 percent in the last session prior to the Fed statement.
"The market jumped after the Fed meeting but there are a lot of people on the long side, so some sort of profit-taking is happening today," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
"We will see how the market reacts in the overnight session. The upside seems to be capped at $1,280 and downside limited at $1,225."
Asian shares gained early and the dollar was on the defensive after suffering substantial losses following the Fed's move to reduce the number of interest rate hikes planned for this year.
The U.S. central bank held interest rates steady after its two-day meeting, as expected. However, fresh projections from policymakers showed they expected two quarter-point rate hikes by year's end.
Gold is highly sensitive to the prospect of rising rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Volatility in equities and oil prices, a raft of mixed economic data, and concerns over global growth had curbed expectations for further hikes, allowing gold to rise more than 18 percent this year.
Meanwhile, U.S. oil futures rose more than 2 percent, adding to strong gains the previous session after the world's biggest suppliers firmed up plans to meet to discuss freezing output.