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.

Gold gains 8% in July
Gold gains 8% in July   

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.