Gold inches lower as Fed holds on to 'considerable' language

Reuters with

Gold fell modestly on Wednesday, as the Federal Reserve continued on track with its plans to wind up its crisis-era monetary stimulus, but left intact language that suggested rates would remain low for a length of time.

The Fed's policy statement curbed fears that the central bank could begin hiking rates as soon as next year, keeping in place language that said zero interest rates would remain "for a considerable time."

Markets have been betting that no change would be made until mid-2015. Talk of an earlier rate hike has increased due to strong economic data.

Chart: Precious Metals

Spot gold was off 0.20 near $1,232 an ounce, after closing up 0.2 percent in the previous session, while U.S. gold futures fell 80 cents to settle at $1,235.90.

Still, prices were not too far from an eight-month low of $1,225.30 hit on Monday as the dollar gained in strength and reached a 14-month peak this month amid expectations of an earlier rate hike.

Bearish investor sentiment was reflected in the flows of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. The fund's holdings fell 4.18 tonnes to 784.22 tonnes on Tuesday.

The U.S. dollar, however, took a knock on Tuesday after the Wall Street Journal's Fed watcher Jon Hilsenrath said the central bank would keep the words "considerable time" in its policy statement, though it might qualify them.

Read MoreWall Street sees Fed hike sooner: CNBC survey

Bullion investors were also eyeing Thursday's referendum on Scottish independence to gauge the impact on the dollar.

"A yes vote is likely to be bullish for gold and a no vote slightly bearish," HSBC said, adding that investor uncertainty from a yes vote would boost gold demand.

--By Reuters