Gold Turns Lower as Dollar Gains After Fed Statement

Getty Images

Gold prices erased earlier gains on Wednesday as investors digested the possibility of tapering and the U.S. dollar rose after the Federal Reserve said it would keep buying $85 billion in bonds per month and gave no explicit indication that it was close to scaling back the program.

"The statement indicates that the economy is on the mend, and the Fed is expecting lower than previously projected levels of inflation," said Frank McGhee, head precious metals trader at Integrated Brokerage Services. "You are looking at continued slow growth but no inflation and no panic on the horizon, that makes gold less attractive and ultimately makes stocks more attractive."

Chart: Precious Metals

Spot gold was last down 0.1 percent at $1,367 an ounce trading in a narrow $10 range. U.S. gold futures gained $7.10 to close at $1,374 an ounce.

Gold on Tuesday slid 1.2 percent as U.S. equities rallied and on market jitters ahead of the Fed decision. The S&P 500 equities index also fell 0.1 percent.

Physical Demand Sluggish

Ron Paul: Gold Could Go to 'Infinity'

Physical Demand Sluggish

Buying in India and China, the top two gold consumers, remained sluggish as demand eased from peak levels seen in April and May. Shanghai gold futures fell more than 1 percent, while Indian gold futures edged lower.

Holdings of the SPDR Gold Trust, the largest gold-backed exchange-traded fund, fell 0.2 percent to 1,001.67 tonnes on Tuesday, their lowest in more than four years.

Among other precious metals, was down 0.1 percent at $22 an ounce. dropped 1.3 percent to $1,422 an ounce and palladium fell 1.7 percent to $696 an ounce.