NEW YORK (Reuters) - Gold rose nearly 1 percent on Wednesday, tracking riskier assets, after the U.S. Federal Reserve said the U.S. economy strengthened in the third quarter despite its lowered its growth forecast for the year.
Even as many investors returned to riskier assets, gold — a traditional safe haven — was supported after sources said Greece would not receive an urgently needed 8 billion euro aid installment due this month, until after the country has held a referendum on the EU’s bailout program.
“Gold is rebounding after it was initially taken lower with the euro and the U.S. stock market falling off. Now, with the Greece news settling in, investors realize it’s a bad problem and they need some protection,” said Zachary Oxman, managing director at futures broker TrendMax.
Spot gold was up 0.8 percent at $1,733.30 an ounce by 2:47 p.m. EDT.
It has risen around 5 percent in the last seven sessions on uncertainty related to the euro zone, having earlier moving in sync with riskier assets such as equities and commodities.
U.S. gold futures for December settled up $17.80 at $1,729.60 an ounce. Trading volume was slightly lower than the previous session’s and lower than the 30-day average.
Gold held gains in choppy trade after the U.S. central bank cut its forecast for economic growth, raised projections for unemployment, and suggested that Europe’s debt crisis posed big downside risks to the U.S. economy.
“The committee expects only a moderate pace of economic growth over coming quarters, reflecting ongoing drags from the troubled housing sector, still-tight credit conditions for many households and smaller businesses, volatility in financial markets...,” Fed Chairman Bernanke said at a news conference following the Federal Open Market Committee’s policy meeting.
In a post-meeting statement, the Fed offered no direct hints that it was considering fresh steps to help the economy. One official, Chicago Fed President Charles Evans, wanted the central bank to ease monetary policy at this meeting.
Analysts said gold benefits from the Fed’s long-term bias toward a loose monetary policy given a tepid growth outlook in the world’s largest economy.
Earlier in the session, gold was boosted by rallies in the U.S. stock markets and commodities after data showed U.S. private sector employers added more jobs than expected last month.
Gold will continue to take trading cues from Europe after Germany and France told Greece to make up its mind fast whether it wants to stay in the euro zone, after a shock decision by Athens to call a referendum on a 130 billion euro ($178 billion) bailout sparked panic on global markets.
Investors will also look forward to the rate decision by the European Central Bank due on Thursday, just as a Group of 20 summit is to take place and will likely pressure Europe on the debt crisis solution.
Gold investment demand continued to pick up this week, reflected in inflows of the metal into exchange-traded funds.
Holdings of gold in the major exchange-traded funds (ETF) tracked by Reuters have risen by over 800,000 ounces this month, marking their first monthly increase since July.
In ETF flows on Wednesday, gold holdings were up by just over 11,000 ounces after an inflow into the COMEX Gold Trust.
Additional reporting by Susan Thomas and Amanda Cooper in London; editing by Andrea Evans