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Singapore, June 26: Gold bounced on Thursday as bargain hunters resurfaced after the US Federal Reserve kept interest rates unchanged and signalled that a rate rise was not imminent.

The dollar's fall against the euro after the Fed's rate decision encouraged some investors to shift their money back into gold. There was light buying by jewellers in Southeast Asia but main consumer India was on the sidelines, dealers said.

Gold rose to $887.45/888.40 an ounce from $879.60/880.60 an ounce late in New York on Wednesday, when it dropped to its lowest level in a week, at $873.50, due to weaker oil prices.

"It seems there's not going to be a rise in interest rates, so it gives some reasons to buy back. I think that's the main issue at the moment," said Ellison Chu, senior manager at Standard Bank London in Hong Kong.

"But it's going to be a rangebound market. $895 will be the high side and the downside is $875," he said.

The US central bank on Wednesday left the benchmark fed funds rate unchanged at 2 per cent and expressed worries about the upside risks to inflation. But it also said it expected price pressures to moderate this year.

The euro was steady at $1.5668, having risen to a two-week high after the Fed's statement helped cool some expectations for a near-term rate increase.

"There's less uncertainty in the market after the Fed meeting," said a dealer in Singapore. "Market participants started to liquidate the dollar and buy euro as they expect the European Central Bank to be more hawkish.

"With the dollar weakening against the euro, good buying interest flows back into gold. For today, gold might again re-test the $900 resistance level," he said.

Gold rose to its highest level in more than a week at $907.90 on rising oil prices last Thursday before retreating. It is well below a lifetime high of $1,030.80 an ounce hit in March.

"I would say there's light buying from Indonesia but there's also some selling from Vietnam. I don't think prices are going to move much," said a physical dealer in Singapore.

India was absent with the local market in a seasonal lull as farmers were busy with sowing the crop during the monsoon season. Demand is expected to pick up again ahead of the Diwali Hindu festival of lights in October, said dealers.

Spot platinum rose to $2,030.50/2,050.50 an ounce from $2,004.50/2,024.50 late in New York. Spot palladium edged up to...