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Gold rises over one-week high on grim Fed outlook

(Reuters) - Gold prices rose on Thursday supported by the U.S. Federal Reserve’s grim economic outlook and commitment to continue injecting support, while stock markets slipped on fears of a second wave of coronavirus infections.

FILE PHOTO: Gold anodes are pictured at Swiss refinery Metalor in Marin near Neuchatel, Switzerland July 5, 2019. Picture taken July 5, 2019. REUTERS/Denis Balibouse/File Photo/File Photo

Spot gold rose 0.3% to $1,740.97 per ounce by 10:24 a.m. ET (1424 GMT), having hit its highest since June 2 at $1,742.71 earlier in the session. U.S. gold futures climbed 1.8% to $1,751.20.

“Even if things start to improve, we don’t expect the Fed to increase rates at all, so we’re going to be in a very low interest rate environment for the foreseeable future, and that’s positive for gold,” said Bart Melek, head of commodity strategies at TD Securities.

The dollar rose against a basket of major currencies, as the Fed projected the economy would shrink 6.5% in 2020 and the unemployment rate at 9.3% at year’s end.

On Wednesday, spot gold rose 1.3%, the biggest daily percentage rise in more than a month, as the Fed signaled a “long road” ahead to recover from the coronavirus-induced slump and flagged the need to keep the key interest rate near zero through at least 2022.

Large stimulus measures and low interest rates tend to support gold, considered a hedge against inflation and currency debasement.

Meanwhile, the latest data showed layoffs in the United States are abating, but millions who lost their jobs because of the pandemic continue to draw unemployment benefits, suggesting the labor market could take years to recover.

“You had a lot of fresh infections, which seemed to spook investors a bit so that pretty much put everybody into a risk off and basically they’re selling everything except for the dollar and natural gas,” said Michael Matousek, head trader at U.S. Global Investors.

Elsewhere, silver declined 1% to $18.06 per ounce, after rising 3.8% on Wednesday.

Palladium eased 0.1% to $1,945.30 per ounce, and platinum edged higher by 0.1% to $833.22.

Reporting by Eileen Soreng and Asha Sistla in Bengaluru; editing by Jonathan Oatis