Gold has held onto its gains, after the Federal Reserve raised US interest rates for the first time in nearly a decade, as expected, making clear it was a tentative beginning to a "gradual" tightening cycle.
The US central bank's policy-setting committee raised the range of its benchmark rate by a quarter percentage point to between 0.25 and 0.50 per cent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
"Gold has held steady as the dovish statement and lower dot plot has leavened the impact of the first rate hike in nine years," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
"The muted reaction suggests that the weakest shorts covered earlier today when gold traded above $US1,078."
Spot gold was up 1.2 per cent at $US1,072.71 an ounce, below the session high of $US1,078.20. Prior to the Fed's statement, US gold futures for February delivery settled up 1.4 per cent at $US1,076.80 an ounce.
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Gold prices have fallen nearly 10 per cent this year, largely on the back of speculation that US rates would be raised from record lows, lifting the opportunity cost of holding non-yielding bullion while boosting the dollar.
They have recovered from near six-year lows this month, however, as attention switched from the timing of the first hike to the potentially slow pace of future increases.
