* Gold cuts gains as dollar rises after Fed statement
* Fed: Deflation worries fading, inflation not a concern
* Dollar has bumpy ride on reports of SNB intervention
(Recasts, updates with Fed statement, quotes; changes dateline,
pvs LONDON)
By Frank Tang
NEW YORK, June 24 (Reuters) - Gold futures traded higher on
Wednesday, but initial gains fizzled as the dollar strengthened
after the U.S. Federal Reserve said that inflation will remain
subdued for some time.
The Fed's comments about low inflation risk could dampen
gold's appeal as a hedge against upward spiral in prices. Bullion
investors have been looking for more clarity from the closely
watched Fed's policy statement.
"I would say it is neutral to maybe slightly positive (to
gold), only in a sense that the Fed eliminated the deflation
threat, so that was no longer an issue," said Bill O'Neill,
managing partner of New Jersey-based LOGIC Advisors.
Concluding a two-day meeting, the U.S. central bank said it
had decided to hold overnight interest rates in a zero to 0.25
percent range -- the level reached in December -- and repeated
that they would likely stay unusually low for some time.
[]
"This was a Fed statement that really has little surprise and
little change," he said.
The dollar extended its gains against the euro after the Fed
announcement. The strength of the U.S. currency has sent gold
prices reeling from a three-month high of $989 per ounce in early
June. []
U.S. August futures <GCQ9> settled up $10.10, or 1.1 percent,
at $934.40 an ounce on the COMEX division of the New York
Mercantile Exchange.
Spot gold <XAU=> briefly spiked to $942.20 in London and was
at $929 by 3:15 p.m. EDT (1915 GMT), against its previous finish
of $925.15.
The dollar had a bumpy ride on Wednesday. Earlier in the
session, it rose against major currencies <.DXY> on talk that the
Swiss National Bank was intervening on currency markets to weaken
the franc. Gains were cut after U.S. durable goods data came in
stronger than forecasts. []
Overall, market watchers said that over the long term the
dollar is facing pressure on expectations that the U.S. Federal
Reserve would not be in a hurry to tighten monetary policy, an
outcome that would benefit gold.
INFLATION WORRIES RECEDE
While appearing more comfortable on deflation risks in their
latest statement, policy-makers made clear inflation was not yet a
concern.
"The prices of energy and other commodities have risen of
late. However, substantial resource slack is likely to dampen cost
pressures, and the committee expects that inflation will remain
subdued for some time," the Fed said.
Worries that heavy government borrowing could boost inflation
receded on Wednesday after the International Monetary Fund said
the recent rebound in oil prices had been largely driven by
speculators, driving oil lower.
"There was a feeling that the Fed would have to tighten
(rates) a lot sooner, but investors are perhaps reassessing their
view of the timing of rate increases," said Robin Bhar, an analyst
at Calyon. "And that, of course, would help gold."
Higher U.S. borrowing costs traditionally raise the allure of
U.S. assets including the dollar, thus pressuring gold.
In other precious metals, spot silver <XAG=> was at $13.81,
against $13.82 quoted late in New York on Tuesday, while platinum
<XPT=> was at $1,156.50, against $1,158.00 and palladium <XPD=>
was flat at $233.50.
(Additional reporting by Nick Vinocur and Veronica Brown in
London and Miho Yoshikawa in Tokyo; Editing by Christian Wiessner)
Close Change Pct 2008 YTD
Chg Close Pct Chg
US gold <GCQ9> 934.40 10.10 1.1 884.30 5.7
US silver <SIN9> 13.910 0.065 0.5 11.295 23.2
US platinum <PLN9> 1167.90 2.50 0.2 941.50 24.0
US palladium <PAU9> 237.45 0.45 0.2 188.70 25.8
Prices at 3:15 p.m. EDT (1915 GMT)
Gold <XAU=> 929.05 3.90 0.4 878.200 5.8
Silver <XAG=> 13.82 0.00 0.0 11.30 22.3
Platinum <XPT=> 1156.50 -1.50 -0.1 924.50 25.1
Palladium <XPD=> 233.50 0.00 0.0 184.50 26.6
Gold Fix <XAUFIX=> 933.50 12.75 1.4 836.50 11.6
Silver Fix <XAGFIX=> 13.880 0.110 0.8 14.760 -6.0
Platinum Fix <XPTFIX=> 1173.00 0.00 0.0 1529.00 -23.3
Palladium Fix <XPDFIX=> 238.00 0.00 0.0 365.00 -34.8
-------------------------------------------------------------
Prices in dollars per ounce.
2008 close for U.S. gold second contract month, U.S. silver and
palladium third contract months and U.S. platinum fourth contract
month.
