April 7, 2016 / 10:05 AM / 3 years ago

PRECIOUS-Gold gains on weaker dollar after Fed remains cautious on rates

* Federal Reserve minutes show caution over world economy

* Dollar hits fresh 17-month low vs yen (Adds comment, second byline, NEW YORK dateline; updates prices)

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON, April 7 (Reuters) - Gold jumped almost two percent on Thursday as the dollar fell to a 17-month low against the Japanese yen following minutes from the U.S. Federal Reserve’s latest meeting and global shares fell, rekindling investor appetite for safer assets.

Minutes from the Fed’s March meeting released on Wednesday showed a consensus by policymakers that risks from a global economic slowdown warranted a cautious approach to raising U.S. interest rates.

They signaled they expected to raise rates twice in 2016 but the timing still appears unclear.

Spot gold hit a two-week high of $1,243.50 an ounce, a rise of 1.8 percent, and was up 1.3 percent at $1,237.60 at 2:23 p.m. EDT (1823 GMT). U.S. gold futures for June delivery settled up 1.1 percent at $1,223.80 an ounce.

“The yen was a catalyst, certainly, for today. It’s clearly a flight to safety day,” said Bill O’Neill, co-founder of commodities investment firm Logic Advisors in New Jersey.

“The minutes of the ECB were clearly dovish. There’s also a growing watch on Greece.”

The metal saw its biggest quarterly rise in nearly 30 years in the three months to March, rallying more than 16 percent and hitting a 13-month high on speculation the Fed was not in a hurry to normalize interest rates.

It had drifted back towards the key $1,200 level in the past week after hawkish comments from several Fed officials.

Gold is sensitive to rate increases as they lift the opportunity cost of holding the non-interest-yielding metal.

“The Fed’s minutes yesterday and the dollar’s weakness have created an environment that gives gold an additional push and attract some pent-up demand,” Saxo Bank senior manager Ole Hansen said.

“The most immediate resistance is $1,244 but a break above $1,255 could suggest a new high in the market.”

The Fed should be patient and cautious about raising short-term interest rates, but should nevertheless increase them in a sustained way, Dallas Fed President Robert Kaplan said on Wednesday.

Global growth concerns weighed on equity markets.

“The share markets are in the red and that is helping gold’s ascent today ... a run towards $1,250 is possible,” MKS SA head of trading Afshin Nabavi said.

Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.51 percent to 819.60 tonnes on Wednesday, the first inflow in nearly two weeks.

Silver gained 0.9 percent to $15.19, platinum rose 1 percent to $951.40 while palladium was down 1.4 percent at $532.37. (Additional reporting by A. Ananthalakshmi in Singapore; editing by David Evans and Meredith Mazzilli)

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