PRECIOUS-Gold jumps to 2-week high as Fed holds US rates steady – Reuters

* Fed holds U.S. interest rates steady

* U.S. dollar index falls to 3-week low

* Gold posted biggest gain in four weeks on Wednesday

(Rewrites throughout, updates prices; adds comment, second
byline, NEW YORK dateline)

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON, Sept 17 (Reuters) – Gold rose to a two-week
high on Thursday after the Federal Reserve said it held U.S.
interest rates steady following a two-day policy meeting,
sending the dollar index to a three-week low.

The U.S. central bank’s decision was a nod to concerns about
a weak world economy, saying that an array of global risks and
other factors had convinced it to delay what would have been the
first rate hike in nearly a decade. It left open the possibility
of a modest policy tightening later this year.

Spot gold was up 0.8 percent at $1,127.80 an ounce,
after rising to $1,130.35, the highest since Sept. 3. It rose
1.3 percent on Wednesday in its biggest daily jump since Aug.
20, helped by data showing U.S. consumer prices unexpectedly
fell in August.

“No change in Fed rate target and little indication of a
commitment to increasing rates still this year is driving dollar
down and providing support to gold,” said Rob Haworth, senior
investment strategist for U.S. Bank Wealth management.

“Fed comments about global market volatility and global
economic risks are also supporting, likely, safe-haven flows
into gold.”

Haworth said, however, that the surge is likely short-lived
as demand for physical gold appears soft and “ultimately we will
be faced with a similar debate as we get to the October

U.S. gold futures for December delivery settled down
0.2 percent at $1,117 an ounce, before the Fed statement.

Expectations ahead of the statement were mixed, with a
Reuters poll showing 45 out of 80 economists expected the Fed
would keep its benchmark interest rate between zero and 0.25

Uncertainty over the Fed’s decision kept gold in a narrow
range early this week, but on Wednesday the metal saw its
biggest rally in four weeks after data showing the surprise dip
in U.S. inflation last month.

Signs of a disinflationary trend in the United States
contrast with a fairly healthy economy and falling unemployment
rate, and highlight the dilemma Fed officials face as they
contemplate raising rates this year.

Silver was up 1.8 percent at $15.16 following a 3.5
percent jump in the previous session. Platinum was up 0.7
percent at $974.74 an ounce and palladium was up 0.1
percent at $609.50.

(Additional reporting by Jan Harvey in London, A.
Ananthalakshmi in Singapore; Editing by Pravin Char and Meredith