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Gold falls on weaker dollar, futures settle at $1,312

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Gold futures settled at nearly 1 percent lower at $1,313 on Wednesday as unexpectedly strong U.S. economic growth stirred fears that the U.S. Federal Reserve could be a step closer to cutting back its stimulus measures.

Spot gold was down 1.1 percent at $1,312 an ounce, holding onto losses after the latest Fed policy statement. It traded as low as $1,306.34, the weakest level in more than a week, earlier in the day. U.S. gold futures settled $11.80 lower at $1,313 an ounce after the Federal Reserve said the economy is still in need of support, offering no indication that a reduction in the pace of its bond-buying stimulus program is imminent.

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Having earlier risen almost 1 percent, gold turned lower after U.S. government data showed gross domestic product grew at a better-than-expected 1.7 percent annual rate in the second quarter. George Gero, vice president at RBC Capital Markets, said that gold was pressured by higher Treasury yields, seen as a gauge of short-term interest rates, a stronger economic outlook and uncertainty related to the Fed statement.

The dollar partially reversed initial losses after the data showed the U.S. economy grew faster than expected.

Despite Wednesday's selloff, gold was still on track to rise more than 6 percent in July, its biggest monthly gain since January 2012.

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The metal posted sharp declines in the last three months as a stronger U.S. economic outlook prompted the Fed to give explicit signals that it will scale back its bond buybacks.

Among other precious metals, silver fell 1 percent to $19.52 an ounce. Platinum was down 0.5 percent to $1,427 an ounce, and palladium edged down 0.4 percent to $725 an ounce.