* Gold rallies, dollar turns lower, after Fed statement
* U.S. data shows inflation rose more than expected in Feb
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
(Rewrites throughout, updates prices; adds Fed statement,
comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, March 16 (Reuters) - Gold rallied 2 percent
to $1,260 an ounce on Wednesday, turning higher after the
Federal Reserve indicated that the United States continues to
face risks from an uncertain global economy, pressuring the
dollar.
The U.S. central bank held interest rates steady after its
two-day meeting, as expected. However, fresh projections from
policymakers showed they expected two quarter-point rate hikes
by year's end.
The U.S. dollar .DXY turned lower after the statement,
falling 0.6 percent against a basket of major currencies, a
source of support for the precious metal.
Spot gold XAU= jumped 2.3 percent to $1,260.61 an ounce at
3:14 p.m. EDT (1914 GMT), after trading down as much as 0.4
percent to $1,226.87 prior to the statement. U.S. gold futures
GCv1 for April delivery settled down 0.1 percent at $1,229.80
an ounce prior to the statement.
Volatility in equities and oil prices, a raft of mixed
economic data, and concerns over global growth had curbed
expectations for further hikes, allowing gold to rise more than
17 percent this year.
"The 50 basis point average drop in the dot plot for 2016
and 2017 combined with the defensive, almost timorous 'global
risks' comment has gold surging almost $25 as two-year yields
plummet 9 basis points and the dollar is under heavy pressure,"
said Tai Wong, director of base and precious metals trading for
BMO Capital Markets in New York.
Fed policymakers had been expected to leave short-term
interest rates unchanged while signaling that a rate hike is not
too far off as long as the job market and inflation continue to
improve.
Gold is highly sensitive to the prospect of rising rates,
which lift the opportunity cost of holding non-yielding bullion,
while boosting the dollar, in which it is priced.
The dollar rose earlier after data showed U.S. core
inflation increased more than expected in February, and U.S.
housing starts beat expectations for the month. FRX/
The world's largest gold-backed exchange-traded fund, SPDR
Gold Shares GLD , said its holdings rose 2.1 tonnes on Tuesday,
after the fund reported its biggest one-day outflow since early
December on Monday. HLDSPDRGT=XAU
Silver XAG= followed gold higher and rallied 1.9 percent
at $15.55 an ounce, while platinum XPT= was up 2.2 percent at
$975.90 an ounce and palladium XPD= was up 1.9 percent at $575
50 an ounce.
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GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC
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