Gold gains as investors digest U.S. Fed tapering announcement

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  • Dollar slips against its rivals
  • Fed signals three rate hikes coming in 2022
  • Fed's Powell: Not expecting to see post-COVID world and job market 'anytime soon'

Dec 15 (Reuters) - Gold prices recovered from early losses to trade higher on Wednesday, drawing support from a decline in the dollar after the U.S. Federal Reserve said it would end its pandemic-era stimulus measures in March.

Spot gold rose 0.4% to $1,777.82 per ounce by 04:28 p.m. ET (2128 GMT). U.S. gold futures settled down 0.4% to $1,764.50.

The U.S. central bank's move signalled its inflation target has been met and paved the way for three quarter-percentage-point interest rate increases by the end of 2022. read more

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"Market was looking for a hawkish move from the Fed and they got it in the dot plot," said Tai Wong, a precious metals trader based in New York.

"The market is happy that the Fed is a little spooked and doesn't want to be too far behind the curve. For gold, the key technical level is $1,750; a break substantially below that could lead to a rout in the waning days of the year."

Gold prices had initially declined nearly 1% to a two-month low after the Fed announcement, but rebounded later as the dollar gave up early gains to trade 0.2% lower.

In its new economic projections, the Fed forecast inflation would run at 2.6% next year, compared with the 2.2% projected as of September.

Rising price pressures boost gold's appeal as some investors view it as a hedge against higher inflation.

Fed Chair Jerome Powell also noted the U.S. economy was improving quickly, but warned he sees no near-term end to the COVID-19 pandemic.

"The risk that the economy could fall into recession in 2023 does not seem so unreasonable. Gold's weakness could be near its end as the Fed will be on autopilot until the March policy meeting," said Edward Moya, senior market analyst at brokerage OANDA.

Silver rose 0.6% to $22.05 per ounce, platinum eased 0.2% to $918.56, and palladium was down 1.3% to $1,600.44.

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Reporting by Ashitha Shivaprasad and Brijesh Patel in Bengaluru; Editing by Shailesh Kuber and Aditya Soni

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