By Matt Whittaker 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--Gold futures remained sharply higher Tuesday after the Federal Reserve left interest rates unchanged, following a higher settlement in which participants were positioning themselves bullishly ahead of the announcement.

Before the pronouncement, most-actively traded April gold had gained $17.10, or 1.5%, to settle at $1,122.50 an ounce, while thinly traded nearby March gold rose $17.10, or 1.5%, to $1,122.20 on the Comex division of the New York Mercantile Exchange.

Shortly after the Federal Reserve announced it would leave the fed funds rate unchanged at a range of 0.0% To 0.25%, April gold was up $20.40, or 1.8%, at $1,125.80 in electronic after-hours activity. The contract's peak for the day came during floor trading at $1,128.10.

"Everything kind of came out as expected," said Craig Ross, vice president of ApexFutures.com.

That indicates a continuation of the accommodative monetary policy that has helped gold prices at the expense of the U.S. dollar.

During gold's day session, there were some market participants putting bullish orders in ahead of the Fed's announcement, said Frank Lesh, broker and futures analyst with FuturePath Trading. "It's a little bit of front running," he said.

Through Monday, Comex April gold had pulled back some 3% from its highest close this month. That left room for the repurchasing of previously sold positions.

"Folks want to square up in front of the Fed," said Sterling Smith, analyst with Country Hedging.

Weak housing data helped expectations that the Fed will stay on the accommodative side, which would generally support gold and keep the dollar under pressure, said Charles Nedoss, senior market strategist with Olympus Futures.

Housing starts decreased by 5.9% to a seasonally adjusted 575,000 annual rate compared to the prior month, the Commerce Department said Tuesday.

Also, amid perceived threats to sovereign debt in different countries, "gold is in my view assuming its role as the ultimate currency," said Bill O'Neill, a principal with LOGIC Advisors. "The preference is to not hold any currencies."

The metal ended its previous session slightly higher despite a stronger dollar because of alternative currency buying. That continued Tuesday with the U.S. dollar weaker after ratings agency Stand & Poor's said it had taken the fiscally stressed Greece's debt off its ratings watch. Gold still managed gains in the euro.

Shortly after gold closed, the ICE Futures U.S. Dollar Index was down 0.364 point, or 0.5%, at 79.887 points.

A lower greenback often boosts dollar-denominated gold by making the metal less expensive for purchasers using other currencies, helping demand. The metal has also been trading against the perceived safety of the greenback as a risk play, in part because ultra-low interest rates have encouraged investment in assets--like commodities, equities and high yielding currencies--that are thought of as riskier.

Technical buying also played a role in Tuesday's gains, with gold continuing a bounce off of support in the $1,100 area, Nedoss said.

Most of gold's gains came Tuesday morning, as its rising price touched off some pre-placed buy orders, fueling more buying, said Stephen Platt, analyst with Archer Financial Services.

The metal pushed past technical resistance around $1,120.

Other precious metals tracked gold prices higher. Comex May silver rose 24.6 cents, or 1.4%, to settle at $17.354 an ounce. Nymex April platinum rose $14.90, or 0.9%, to settle at $1,630.70 an ounce while June palladium on the exchange gained $11.75, or 2.6%, to settle at $472.40 an ounce.

 
Settlements (ranges include open-outcry and electronic trading): 
London PM Gold Fix: $1,124.75; previous PM $1,104.25 
Spot gold at 1:31 p.m. ET: $1,123.00, up $14.10; Range: $1,106.40-$1,128.00 
Apr gold $1,122.50, up $17.10; Range $1,108.10-$1,128.10 
May silver $17.354, up 24.6 cents; Range $17.130-$17.495 
Apr platinum $1,630.70, up $14.90; Range $1,618.50-$1,634.80 
Jun palladium $472.40, up $11.75; Range $462.10-$477.00 
 

-By Matt Whittaker, Dow Jones Newswires; 212-416-2139; matt.whittaker@dowjones.com