NEW YORK/LONDON: Gold turned lower after hitting a two-week peak on Thursday as the dollar pared losses and US stocks climbed from their lows ahead of a possible Bank of Japan announcement to expand monetary stimulus on Friday.
The turn around followed a rise in bullion prices after the US Federal Reserve stopped short of indicating that a further increase in interest rates is on the cards for later this year. Relief that the Fed was not more explicit about rates pulled it back to a two-week peak on Thursday.
Spot gold was down 0.3 percent at $1,335.60 an ounce at 3:28 p.m. EDT (1938 GMT), after rising to a two-week top at $1,345.21. US gold futures for August delivery settled up 0.4 percent at $1,332.30.
The US dollar pared its losses against a basket of major currencies, as the yen weakened on a report that the Japanese government is pressuring the Bank of Japan to expand its stimulus. US stocks also came off their lows.
"That effectively gave the (gold) market a reason to take profits," said James Steel, chief metals analyst for HSBC Securities in New York.
"The rally was very sharp. The market lost its footing."
Gold is sensitive to rising US rates, which would lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
"The gold price reacted quite positively to the news that there was no rate hike, and that a September rate hike is not certain," Capital Economics analyst Simona Gambarini said about the market's earlier strength. "But this is probably short-term volatility."
"We are quite hawkish on the Fed policy for this year and next," she said. "The Fed is running out of excuses to not hike rates."
The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, has seen an outflow of nearly 28 tonnes in the last three weeks.
Among other precious metals, palladium turned lower after rising 0.9 percent to its highest since mid-October at $708 an ounce.
The autocatalyst metal has soared 18 percent so far in July, its best monthly performance in almost 8-1/2 years, as it catches up on gains made by other precious metals in the wake of the Brexit vote, and benefits from greater demand for cyclical assets.
Platinum hit a fresh 14-month high at $1,154.20 and was later own 0.1 percent at $1,133.75 an ounce. Silver was down 0.8 percent at $20.19 an ounce.
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