(Reuters) - Gold climbed on stronger equities on Thursday, but was still within sight of its weakest level in seven weeks as the U.S. Federal Reserve helped boost the U.S. dollar's safe-haven appeal by announcing its commitment to economic stimulus measures.
Gold had rallied to an 11-month peak of $1,795.69 an ounce in early October following the Fed's latest program of purchasing mortgage-backed debt, but has since drifted lower as the U.S. dollar strengthened and, more recently, after signs emerged of a slight improvement in the U.S. economy.
Gold had risen $8.27 to $1,710.20 an ounce by 1.56 a.m. EDT. It fell to a 7-week low of around $1,698 on Wednesday soon after the Fed said it was sticking to its plan to keep stimulating growth until the job market improves.
"I think $1,700 is still quite a key support level. Generally gold has been falling due to the dollar strength. Recently, we also saw some stronger economic data coming from the U.S.," said Lynette Tan, senior investment analyst at Phillip Futures in Singapore.
"I expect that around the $1,700 level, we could also see some bargain hunting," said Tan, adding that a firmer rupee could help boost demand from top consumer India during the festive season.
In a statement after a two-day meeting, the Fed repeated its vow to keep rates near zero until mid-2015 and its pledge to keep supporting growth while the recovery strengthens.
Despite the absence of surprises, the outcome should give investors confidence to use the dollar as a funding currency for carry trades. The dollar index .DXY eased from a peak of 80.151 to 79.850, but was still above last week's trough of 78.935.
U.S. gold for December delivery added $9.70 an ounce to $1,711.30. Spot silver, platinum and palladium bounced from lows.
In other markets, shares in Asia inched up Thursday as signs of recovery in China and the United States eased fears of deteriorating global growth, though generally weak corporate earnings continued to make investors wary.
A lack of activity in the physical sector suggested that some consumers expected gold prices to fall again. Gold has come under pressure this week from worries about the global economic slowdown after a trail of disappointing U.S. corporate earnings.
"We were surprised to see profit-taking from Indonesia yesterday. It's all quiet and the demand is not there. I spoke to a couple of clients and they told me the price should weaken again," said a physical dealer in Singapore.
"But India should come back to the market because Diwali is coming. We should be expecting a big volume of sales or a last minute rush before the celebration," said the dealer.
The festive season in India will peak next month with Diwali. Weddings also take place during this period, with gold jewelry an essential part of the dowry Indian parents give to their daughters.
(Editing by Miral Fahmy and Joseph Radford)
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