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Commodities: Gold prices rise, crude drops and Fed member attacks banks' trading

LONDON (ShareCast) - Gold prices rose on Thursday after the Federal Reserve made it clear that US interest rates would be hiked in the near future but gradually rather than suddenly. Gold for April delivery rose 1.5% to $1,169 an ounce. Elsewhere, Brent futures fell 2.7% to $54.41 a barrel at the end of Thursday's session, while ICE WTI futures dipped 2.2% to $45.61.

The past 48 hours have seen crude oil dip to cyclical lows, recover in wake of Fed comments on Wednesday, only lose fizz in early Asian trading on Thursday.

IG (LSE: IGG.L - news) analyst Alastair McCaig noted: "Yesterday's moves in the dollar looked to have triggered a bounce in oil prices, with both Brent and US light bouncing higher. This move, however, has been short-lived as the dollar has once again regained its authority." Over on the LME , three-month copper futures increased 3.2% to $5,839.00 a tonne. CMC Markets analyst Jasper Lawler added: "Copper outperformed gaining close to 2% following the sharp reversal seen yesterday.

"Having sold off on weak Chinese and US housing data, the industrial metal about-turned on the dollar weakness." In other developments, at a US Senate committee hearing in Washington DC, Fed board member Daniel Tarullo called for a strengthening of the Dodd-Frank Act to limit the activity of banks trading in the wider commodities markets.

Tarullo was particularly scathing about Morgan Stanley (Xetra: 885836 - news) and Goldman Sachs (NYSE: GS-PB - news) claiming that "those two firms are by statute allowed to engage in the extraction and transportation of highly combustible materials with substantial risks associated with them." Most banks are barred from dealing in specific products like zinc and copper. However, an exemption written into US legislation allows firms that became "bank holding companies" after 1999 to continue operating their existing commodities desks. Both Goldman Sachs and Morgan Stanley, which became bank holding companies during the global financial crisis, are protected by the clause.