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Gold climbs after Fed, BoJ stand pat

Gold rose Thursday as the Bank of Japan held off from expanding monetary stimulus, boosting the yen versus the dollar, and after the Federal Reserve signaled that it was in no rush to tighten monetary policy.

The Fed left interest rates unchanged after its latest meeting on Wednesday and, while keeping the door open to a hike in June, showed little sign it was in a hurry to tighten policy amid an apparent slowdown in the U.S. economy.

Spot gold was up 1.7 percent at $1,266.70 an ounce, off an earlier one-week high of $1,258.70, while U.S. gold futures for June delivery were up $18.20 an ounce at $1,268.60.

"The Fed in the end was dovish when a slightly more hawkish message was expected, so that was supportive for gold, while the Bank of Japan clearly wrong-footed the market," Societe Generale analyst Robin Bhar said. "The uncertainty factor is helping gold in dollar terms."

German bond yields fell as relief spread across markets that the Fed had not strongly signaled that it would raise interest rates in June, while the dollar slid 0.68 percent against a basket of currencies.

The U.S. currency came under further pressure after the Bank of Japan defied market expectations for more monetary stimulus, boosting the yen. The subsequent near 3 percent fall in dollar/yen was its biggest daily drop since August 2015.

U.S. short-term interest rate futures reflect the expectation the Fed will wait until September before raising rates.

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

"The longer the Fed holds off on raising rates, the better for gold," HSBC said in a note. "The bullion market will now focus on the prospects of a Fed hike at the next meeting in June, and the possibility that the Fed will tighten later this year may help cap bullion prices."

Gold has rallied 17 percent this year on expectations that the Fed will not raise rates aggressively this year due to global economic risks. The U.S. central bank hiked rates in December for the first time in nearly a decade.

After three straight years of losses, analysts are finally prepared to say gold prices have found a floor, with rising prices seen this year and next as concerns over the pace of U.S. monetary policy tightening fade.

Among other precious metals, silver futures were up 1.83 percent at $17.60 an ounce, platinum futures were up 2.8 percent at $1,053.70 an ounce and palladium futures were up 2.52 percent at $624 an ounce.