* Gold volatility seen increasing
* SPDR Gold holdings rose 0.60 percent
* Silver, palladium, platinum at two-week highs
By Zandi Shabalala
LONDON, Sept 22 Gold hit 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 gained on Wednesday after the Fed stayed pat on
rates but indications it could still tighten monetary policy in
the world's biggest economy by the end of the year weighed on
gold prices initially on Thursday.
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 0.2 percent at $1,339.46 an ounce by
1400 GMT, close to levels last seen on Sept. 8. The dollar index
, which measures the greenback against a basket of
currencies, slipped to its lowest since Sept. 12.
U.S. gold futures rose 0.5 percent to $1,337.50 an
"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 be closely analysing upcoming U.S. data such as
gross domestic product figures, non-farm payrolls and inflation
for clues as to the timing of any rate rise.
"The Fed have signalled 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.
"However, gold's good recovery once again from the support
area will discourage any aggressive selling," he said, adding it
would trade between $1,310-$1,350 in the absence of news.
Other asset classes such as shares and bonds added to gains
in the previous session as the dollar softened.
Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, rose 0.60 percent to 944.39
tonnes on Wednesday.
Among other precious metals, silver rose 1 percent to
a two-week high of $20.02 ounce.
Platinum rose 1.2 percent to $1,062.90 per ounce and
palladium climbed 2.5 percent to $700.10, both two-week
(Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; editing by Mark Potter and David Clarke)