Gold prices climbed to a record high Thursday as the U.S. dollar and bond yields ticked lower after the Federal Reserve maintained its projection of three rate cuts for this year.

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Spot gold was up 1% at $2,208.30 per ounce, as of 0725 GMT, after hitting an all-time high of $2,222.39 earlier in the session. U.S. gold futures jumped 2.3% to $2,211.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The Fed held interest rates steady on Wednesday, but policymakers indicated they still expected to cut them by three quarters of a percentage point by end-2024.

Uncover the Full Story: How Gold's Record Surge Ties into Global Currency Wars ... Read here

Fed Chair Powell said recent high inflation rate readings had not changed the underlying "story" of slowly easing U.S. price pressures.

"It's the goldilocks scenario for gold prices, where marginally higher inflation expectations meet lower nominal rates to create decreased real yields," said Kyle Rodda, a financial market analyst at Capital.com.

"A dovish Fed, a little squeeze on existing shorts, and a touch of momentum chasing have boosted bullishness in the gold market."

Fed funds futures traders are now pricing in a 75% probability that the central bank will begin cutting rates in June, up from 59% on Tuesday, according to the CME Group's FedWatch Tool.

"With Powell keeping three potential rate cuts in play this year, bond yields and the USD dipped, which opened a pathway higher for the gold price," Tim Waterer, chief market analyst at KCM Trade, said in a note.

The dollar slipped to a one-week low against rivals, while benchmark U.S. 10-year Treasury yields also dipped.

Spot gold may retest resistance at $2,222 per ounce, a break above which could lead to a gain into the $2,228-$2,234 range, according to Reuters' technical analyst Wang Tao.

Spot silver gained 0.4% to $25.72 per ounce, platinum rose 0.6% to $912.50 and palladium climbed 1% to $1,031.55.

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