* Fed's Wednesday decision viewed as dovish
* U.S. dollar at lowest since Sept. 12, supports gold prices
* Silver and palladium at two-week highs
(Updates prices; adds comment, byline, NEW YORK dateline)
By Marcy Nicholson and Zandi Shabalala
NEW YORK/LONDON, Sept 22 Gold rose to a two-week
high on Thursday after the U.S. Federal Reserve's decision to
keep interest rates on hold sent the dollar to its lowest level
since the start of last week.
Bullion rallied 1.7 percent on Wednesday after the Fed
stayed pat on rates but indicated it could still tighten
monetary policy in the world's biggest economy by the end of the
Gold is highly exposed to monetary policy, particularly in
the United States, as higher interest rates lift the opportunity
cost of holding non-yielding assets and boost the dollar, in
which the precious metal is priced.
Spot gold rose for the fourth straight day, up 0.1
percent at $1,337.28 an ounce by 2:31 p.m. EDT (1831 GMT), after
rising 0.5 percent to $1,343.64, the highest since Sept. 8. The
dollar index, which measures the greenback against a
basket of currencies, slipped to its lowest since Sept. 12
before paring losses.
U.S. gold futures settled up 1 percent at $1,344.70.
"This is a follow on from what happened yesterday with the
Fed being more dovish, the market is now going through the
upside in gold prices," said ABN AMRO commodity strategist
Georgette Boele, adding that gains may be capped around $1,350.
Markets will closely analyze upcoming U.S. data for clues as
to the timing of any rate rise.
"The Fed have signaled that if everything stays the way it
is then December is more than likely the next rate rise and this
will keep a lid on any rally," David Govett, head of precious
metals at Marex Spectron, said in a note.
World stock indexes jumped and the Nasdaq hit a record high
while bonds rallied.
"The lower government bond yields have boosted the appetite
for racier assets like equities, while at the same time they
have made precious metals ... appear more appealing to investors
on a relative basis," said Fawad Razaqzada, market analyst for
RBC Capital Markets said in a note: "Despite gold's jump
yesterday, we think it will remain well short of year-to-date
highs, and while it will certainly experience continued
volatility in line with a number of other macro assets, we
remain cautious through year-end," RBC said.
Silver rose as much as 1.3 percent to a two-week high
at $20.06 an ounce.
Platinum rose by as much as 1.7 percent to $1,065.80,
the highest since Sept. 12, and palladium climbed 2.5
percent to $700.30, the highest since Sept. 7.
(Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; editing by David Clarke and Marguerita Choy)