PRECIOUS-Gold touches over 2-week high after Fed pledges to keep rates low

* Fed expects a temporary surge in inflation
* Dollar index slips to two-week low
* Palladium at over one-year peak of $2,640.76

(Updates prices)
By Asha Sistla
March 18 (Reuters) - Gold prices rose to a more than
two-week high on Thursday after the U.S. Federal Reserve pledged
to keep near-zero interest rates until 2023, although the
safe-haven metal's gains were capped by the central bank's
forecast of a strong economic rebound.
Spot gold XAU= rose 0.4% to $1,750.82 per ounce by 0542
GMT, having touched its highest since March 1 at $1,755.25. U.S.
gold futures GCv1 jumped 1.3% to $1,749.80.
The U.S. economy was on track for its fastest expansion in
nearly 40 years, the Fed said on Wednesday while reaffirming its
ultra-easy monetary policy stance amid an expected, although
temporary surge in inflation. "There was a risk-on response (after the Fed announcement)
and the dollar weakened significantly. One might expect dollar
negativity to be supportive for gold. That wasn't what happened,
the main logic there really had to do with yields, which were on
the march higher," said DailyFX currency strategist Ilya Spivak.
"They are getting more optimistic and that doesn't bode well
for gold and suggests that the trend lower is likely to
continue. It didn't get a huge decline because the dollar was
weaker."
Higher U.S. interest rates and Treasury bond yields raise
the opportunity cost of holding non-yielding bullion.
The dollar index slipped to a two-week low, while benchmark
U.S. Treasury yields held close to a more than one-year peak.
US/ USD/
"If the dollar continues its weakening track and yields
continue to be calmed by Fed language, then this can set gold up
for a test of $1,800," said Nicholas Frappell, global general
manager at ABC Bullion.
Palladium XPD= gained 1.2% to $2,599.75, extending its
rally to the highest level since March 2, 2020 after Nornickel
GMKN.MM , the biggest producer of the metal, slashed its output
forecast due to waterlogging at two Siberian mines. Silver XAG= rose 0.6% to $26.49 an ounce and platinum
XPT= was up 0.1% at $1,214.55.