Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria, March 18, 2016. REUTERS/Leonhard Foeger

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold hit a six-week high on Wednesday, climbing for the sixth straight session after the Federal Reserve lowered its economic growth forecasts through 2017, indicating it will be less aggressive in tightening monetary policy next year.

Following a two-day meeting, the Fed kept said it kept interest rates unchanged as expected but signalled it still plans two rate increases this year, saying it expects the U.S. job market to strengthen after a recent slowdown.

The U.S. dollar (.DXY) extended losses against a basket of currencies while global stock markets briefly added to gains. [MKTS/GLOB]

Spot gold (XAU=) was up 0.7 percent at $1,293.86 an ounce at 2:48 p.m. EDT (1848 GMT), after rising to $1,296.70, the highest since May 3.

U.S. gold futures (GCv1) for August delivery settled up 20 cents an ounce at $1,288.30 prior to the Fed statement.

"What does elevate an eyebrow is the Fed has tempered its longer term growth outlook with 2018’s Fed Funds median target dropping 62 basis points," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

"Gold has rallied cautiously on the news and would disappoint if it does not re-test highs of the move above $1,300 soon with yields and dollar lower."

The metal is highly sensitive to U.S. interest rates, increases in which lift the opportunity cost of holding non-yielding gold and boost the dollar, in which gold is priced.

"With regards to the dot plot, the median of FOMC participants still see two hikes occurring in 2016, however now six participants see only one hike this year as opposed to only one in March," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto. Mendes said they do not expect a rate hike until September.

Bullion already rallied for the prior five sessions as assets seen as higher risk, such as shares, saw heavy losses on concerns about Britain's possible exit from the European Union, commonly referred to as Brexit. Yields on safe-haven German Bunds fell below zero for the first time.

Gold priced in sterling (XAUGBP=R) turned higher after the Fed statement, rising 0.4 percent a nearly three-year peak.

On Tuesday, holdings in SPDR Gold Trust (GLD), the world's largest gold-backed exchange-traded fund, rose to the highest since October 2013. [GOL/ETF]

Among other precious metals, silver (XAG=) was up 1 percent at $17.54 an ounce, platinum (XPT=) was up 0.1 percent at $974.50 an ounce and palladium (XPD=) was 0.5 percent higher at $535.50 an ounce.





(Additional reporting by Vijaykumar Vedala and Koustav Samanta in Bengaluru; Editing by Meredith Mazzilli)