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London - Gold traded near a three-week high in London as the US Federal Reserve said interest rates will remain low, boosting demand for the precious metal as an alternative investment.

Fed Chair Janet Yellen said the central bank plans to keep its interest-rate target low for a considerable time after it ends bond-buying, sending the Bloomberg Dollar Spot Index to the lowest level this month. The central bank said it would cut bond purchases by another $10 billion, to $35 billion, as expected by analysts. Gold ended a 12-year rally in 2013 on expectations that the central bank would scale back stimulus put in place to fuel growth.

“The FOMC policy statement did not contain major surprises, although at the margin, the general tone was probably more dovish than expected,” analysts including Edel Tully at UBS AG said in a report. “In effect, the lack of an aggressive Fed is gold-supportive.”

Gold for immediate delivery rose 0.3 percent to $1,281.42 an ounce at 10:23 a.m. in London, according to Bloomberg generic pricing. The precious metal climbed to $1,284.96 on June 16, the highest level since May 27, amid concern that unrest in Iraq and Ukraine would increase demand for bullion as a haven.

Gold for August delivery increased 0.7 percent to $1,281.80 an ounce on the Comex in New York. Futures trading volumes were 16 percent lower than the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

The Federal Open Market Committee cut asset purchases at the end of a two-day meeting for the fifth straight time. Fed participants estimated long-term growth for the US economy of 2.1 percent to 2.3 percent, compared with 2.2 percent to 2.3 percent in March and 2.5 percent to 2.8 percent in January 2010 in the wake of the most recent recession.

Silver for immediate delivery rose 0.4 percent to $19.969 an ounce after climbing earlier to $19.9779, the highest level since May 14. Platinum added 0.4 percent to $1,456.63 an ounce, while palladium advanced 0.1 percent to $826.70 an ounce.

Platinum producers in South Africa are seeking more meetings with the biggest union to discuss a compromise on new pay demands delaying a settlement of a 21-week strike. The Association of Mineworkers and Construction Union submitted additional terms that companies say are unaffordable. South Africa is the biggest platinum and second-largest palladium producer. - Bloomberg