Gold rose on Thursday as a softer US dollar lent support, while investors weighed the Federal Reserve's decision to keep interest rates unchanged and monitored escalating tensions in the Middle East that could stoke inflationary pressures, reports Reuters.
Spot gold rose 0.3per cent to $4,076.52 per ounce by 1131 GMT. US gold futures for August delivery gained 1per cent to $4,074.30.
"The move (for gold) is primarily driven by a weaker US dollar, with markets modestly adjusting their expectations on the next Fed moves," UBS analyst Giovanni Staunovo said.
The US dollar index softened 0.2per cent, making greenback-priced bullion more affordable for buyers overseas.
The Fed on Wednesday left its benchmark rate in the 3.50per cent-3.75per cent range, while US central bank chief Kevin Warsh pledged an unwavering commitment to bring inflation down. Spot gold prices rose about 2per cent after the policy decision.
Meanwhile, the US military said it struck dozens of Islamic Revolutionary Guard Corps targets in Iran, in retaliation for Tehran firing ballistic missiles at US troops in Jordan on Wednesday.
Brent crude prices climbed more than $1 a barrel on Thursday.
"To see gold rising, we need an improvement in investment demand and that requires market participants to shift expectations towards rate cuts," Staunovo said.
Despite being known as an inflation hedge, higher-for-longer rates tend to diminish bullion's appeal due to its non-yielding characteristic.
Traders are pricing in about a 63per cent chance of a rate hike at the Fed's September meeting, down from about 77per cent before the Fed meeting on Wednesday, according to the CME FedWatch Tool. FEDWATCH
Investors now await June US Personal Consumption Expenditures (PCE) data, due at 1230 GMT.
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