Gold futures bounced back Thursday to push higher, a day after the Federal Reserve scaled back expectations for the next interest rate hike, citing a weak global economic environment and volatile stock markets.
The U.S. central bank signaled two more rate increases this year instead of the four hinted at back in December, as the policy makers “continue to see risks” to the economy. The dovish outlook sent the dollar sharply lower and instead spurred a rally in dollar-denominated commodities such as gold.
“Never underestimate the power of the Fed to impact the markets. The doves are clearly winning the argument resulting in yesterday’s dovish announcement, which dragged the Fed back far more in line with market views on the potential for rate hikes in 2016,” said Richard Perry, analyst at Hantec Markets, in a note.
“Once the dust settles we will get more of an idea of how sustainable this move is for the gold bugs,” he added.
Gold for April delivery GCJ6, +2.98% tacked on $34.60, or 2.8%, to $1,264.70 an ounce.
The ICE dollar index DXY, -0.95% slumped 0.9% to 94.85.
Gold has reclaimed its upside momentum and it has potential for an extended rally if it closes above $1,287.80 in the near term, which was last week’s high, said Jim Wyckoff, senior analyst at Kitco.com, in a report.