Bengaluru: Gold topped the $1,300 level for the first time since early May on Thursday, after the US Federal Reserve indicated it could be less aggressive in tightening monetary policy next year.

The Fed kept interest rates unchanged on Wednesday and signalled it still planned to raise rates twice in 2016, though it said slower economic growth would crimp the pace of monetary policy tightening in future years.

Gold is sensitive to interest rate hikes, which increase the opportunity cost of holding the non-interest yielding metal.

Spot gold was up 0.7 per cent at $1,300.20 an ounce as of 0401 GMT, after touching a peak of $1,301.40, its highest since May 3, earlier in the session.

US gold climbed 1.2 per cent to $1,303.40

The bullish impact of the FOMC’s decision to leave rates unchanged and the tone of the statement are near-term gold bullish, HSBC analyst James Steel said in a note.

“But the impact may be limited as the market had already largely ruled out a near-term rate rise and we do not believe the following Fed statement was outside of expectations,” he said, adding the central bank’s policy was shaping up to be long-term supportive of gold.

A small majority of Wall Street’s top banks expects the Fed to raise interest rates no more than once this year, results of a Reuters poll showed on Wednesday.

The Fed’s cautious stance comes ahead of a referendum in Britain on June 23 on whether it would exit the 28-member European Union. The move dubbed Brexit could tip Europe back into a recession, putting more pressure on the global economy and boosting the safe-haven appeal of bullion.

Asian stocks turned lower on Thursday, while the dollar slid to a 21-month low against the yen after the Bank of Japan refrained from taking further stimulus steps, hours after the Fed’s review.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.23 percent to 900.75 tonnes on Wednesday, the highest since October 2013.

Spot silver rose to as high as $17.76, its highest since May 2, before trading 1.3 percent higher at $17.73 per ounce.

Among other precious metals, spot platinum rose 1.4 percent to $984.40 per ounce and spot palladium climbed 0.8 percent, to $536.22 per ounce.