Investing.com - Gold futures soared to the highest level since August 2014 in European trade on Thursday, as investors digested the latest monetary policy decisions from the Federal Reserve and Bank of Japan.
The Fed kept interest rates unchanged on Wednesday, but dialed back forecasts for how fast it will raise rates over the next couple of years, citing concerns over the economic outlook.
While the U.S. central bank retained its forecast for two rates this year, updated projections revealed that six members wanted to see one rate hike this year, compared to just one policymaker in March. Fed forecasts also show at least four fewer hikes than previously projected through 2018.
Market players are pricing in just an 8% chance for a rate hike in July, down from around 20% a day earlier, and 29% for September, according to CME Group's (NASDAQ:CME) FedWatch tool. December odds were at about 48%, compared to 59% ahead of the Fed outcome.
The yellow metal is sensitive to moves in U.S. interest rates. A gradual path to higher rates is seen as less of a threat to gold prices than a swift series of increases.
Meanwhile, the Bank of Japan kept monetary policy steady on Thursday even as sluggish global growth and anemic inflation put policymakers under pressure to do more to reflate the economy out of stagnation, bolstering the yen and battering Tokyo stocks.
The yen rallied nearly 2% against the dollar to hit 103.96, the strongest level since August 2014, while the Nikkei 225 plunged 3% following the BoJ's decision.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.4% to 94.30, down sharply from Wednesday’s highs of 95.15.
Dollar weakness usually benefits gold, as it boosts the metal's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Gold for August delivery on the Comex division of the New York Mercantile Exchange jumped to an intraday peak of $1,314.35 a troy ounce, the highest level in 22 months. It last traded at $1,313.50 by 06:43GMT, or 2:43AM ET, up $25.20, or 1.96%.
Prices of the precious metal are up more than 8% so far in June, as market players pushed back expectations for the next U.S. rate hike and amid mounting concerns the U.K. will vote to leave the European Union in a referendum next week.
A series of recent opinion polls showed a big lead for the "leave" camp ahead of the country's June 23 referendum.
Elsewhere on the Comex, silver futures for July delivery spiked 33.2 cents, or 1.9%, to trade at $17.83 a troy ounce during morning hours in London, while copper futures shed 2.2 cents, or 1.05%, to $2.068 a pound.