Spot gold added 1.3 per cent to $2,004.79 per ounce and U.S. gold futures settled 0.2 per cent up at $1,997.30

Gold prices rose more than 1 per cent on Wednesday as the U.S. dollar index and Treasury yields dropped after the U.S. Federal Reserve flagged an end to its interest rate hike cycle.

Spot gold added 1.3 per cent to $2,004.79 per ounce as of 1934 GMT. U.S. gold futures settled 0.2 per cent up at $1,997.30.

The U.S. central bank held interest rates steady on Wednesday. A near unanimous 17 of 19 Fed officials project the policy rate will be down by the end of 2024 than it is now, with the median projection showing the rate dropping three-quarters of a percentage point from the present 5.25 per cent-5.50 per cent.

The Fed’s acknowledgement of inflationary pressures continuing to come down has raised interest rate cut expectations, which is seeing a dramatic decline in yields and dollar, and a subsequent increase in gold and silver, said David Meger, director of metals trading at High Ridge Futures.

We believe the current upward move in gold is a sustained rally, he added.

The dollar index shed 0.6 per cent after the Fed comment, making gold less expensive for overseas buyers. U.S. 10-year Treasury yields extended its decline.

The yield on the 10-year Treasury touched its lowest level since August after the Federal Reserve held rates steady for a third successive meeting and set the stage for three cuts in 2024. The 10-year Treasury lost 19 bps to 4.016 per cent.

Fed Chair Jerome Powell said inflation has eased without significant increase in unemployment and that full effects of tightening is likely not yet felt.

Data showed U.S. producer prices were unexpectedly unchanged in November, suggesting inflation at the factory gate continued to decline.