Gold Shrugs Off Fed Rate Rise to Push Higher

By David Hodari

LONDON--Gold prices climbed Thursday, as the dollar weakened following the Federal Reserve's decision to raise interest rates late Wednesday.

The precious metal was last up 0.40% at $1,304.97 a troy ounce in late morning trade.

Copper, meanwhile, fell 0.55% to $7,202 a metric ton, with the whole base metals complex down on fears that Chinese environmental directives may stymie demand.

The Federal Reserve opted to raise interest rates late Wednesday, and with that decision came hawkish commentary on the central bank's future interest rate policy. Such a move would normally boost the dollar and, in turn, weigh on gold prices.

However, while the Fed raised the number of rate increases it expects to make this year, the tightening projected overall for the forecast period hasn't changed, said Lee Hardman, currency analyst at MUFG, in a note. The Fed still expects to raise six time before the end of 2020.

On top of that, not only has the dollar in recent months reached what many in the market believe to be its peak, the market had also long-expected the Fed to raise rates Wednesday and baked that move into prices, Mr. Hardman said.

The WSJ Dollar Index, which measures the currency against a basket of 16 others, was last down 0.24%, eroding its gains of the past five days to just 0.1%.

With the Fed strengthening its inflation outlook, "I think the move is less about the rate raise from the Fed and more about investors increasing their exposure to gold as an inflation hedge," said Kash Kamal, an associate at BMO Capital Markets.

Gold investors were keeping an eye on dollar-euro moves ahead of the European Central Bank's policy announcement due later Wednesday, in which the central bank was expected to provide clarity about whether Italy's recent political strife has affected its plans to begin winding down its massive bond-buying program later in the year.

Among base metals, zinc was down 0.42% at $3,198.50 a metric ton, aluminum fell 0.59% to $2,265.50 a metric ton, tin was down 0.02% at $20,870 a metric ton, nickel was down 2.17% to $15,310 a metric ton and lead fell 0.32% to $2,477 a metric ton.

Among precious metals, silver was up 0.53% at $17.13 a troy ounce, platinum rose 0.18% to $905.60 a troy ounce and palladium rose 0.53% to $1,107.50 a troy ounce.

Write to David Hodari at [email protected]