Gold Holds Losses After Fed Decision

Pro: Why Gold's Headed Lower

Gold slipped slightly in brisk trade on Wednesday after the U.S. Federal Reserve issued its latest policy statement, repeating its accommodative stance while extending it another two years, but gains in the euro provided support for the precious metal.

The latest communique said the Federal Reserve would keep to its plan to stimulate the U.S. economy with large-scale bond purchases despite data indicating improved growth. But, policy makers would monitor risks posed by their policies, as well as their progress in lowering unemployment.

While gold prices fell somewhat following the release, they mostly held within a narrow trading range, underpinned by strength in the euro currency.

(Read More: Pro: The Level of Truth for Gold)

"To me it looks neutral for gold. It's still a little bit on the defensive, but there is not a big argument from the (Fed) statement for gold to drop," said James Steel, chief commodities analyst at HSBC in New York.

Spot gold recently changed hands around $1,606 per ounce, down 0.42 percent. U.S. gold futures for April delivery were off 0.36 percent at $1,605.50, after settling $1,607.50 per ounce.

Gold had eased from the previous session's three-week high, reflecting some investor optimism that the crisis in Cyprus may not spread further in the euro zone.

Cypriot leaders were still scrambling to avert a financial meltdown after parliament rejected the terms of a European Union bailout, but markets remained calm as investors waited for an alternative solution to emerge.

Bullion hit a three-week high at $1,615.16 just before the Cypriot parliament vote on Tuesday, as investors sought refuge in the safe-haven metal.

The euro rebounded from a four-month low on the dollar as immediate fears about a financial meltdown in Cyprus eased, with the island country pleading for a new loan from Russia.

Following the FOMC meeting, Fed Chairman Ben Bernanke held a press conference, but gold reacted little to his comments. He reiterated that the Fed would continue with its asset purchases until the labor market outlook improves substantially.

"When we see that the (labor market) situation has changed in a meaningful way, we may well adjust the pace of purchases," he added.

The Fed also said it extended plans to keep key interest rates low until 2015 from 2013 previously. It slashed benchmark overnight interest rates effectively to zero in 2008 as it battled the financial crisis.

Asked whether Bernanke's comments impacted gold prices, David Lee, a metals trader at Heraeus Precious Metals Management in New York said, "No, I really don't think so. Everyone's still digesting what he's saying."

"You need more data points and I think that's what Bernanke's saying. But he's not going to give away his hand. So let's see what happens with tomorrow's weekly job report."

With the Fed's emphasis on the U.S. employment situation, Lee said longer term gold buyers will likely wait to see whether the weekly U.S. jobless claims report on Thursday continues to show improvement before jumping in to buy the metal.

Supportive of gold prices, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 2.708 tonnes to 1,222.162 tonnes on Tuesday, the first increase in daily holdings since early February.

(Read More: Will Cyprus Turn the Tide for Gold?)

Physical Buying Lags

The rise in spot gold prices for six of the past seven sessions has dented demand in Asia's physical markets, where buying slowed from earlier in the month.

Buyers are waiting for prices to return to lower levels if the situation in Cyprus calms down.

"But in China there may also be some element of pay back, as typically strong activity in March was brought forward to the latter half of February amid more attractive prices," said UBS analyst Joni Teves said in a note.

Silver eased 0.4 percent to $28.75 an ounce.

Spot platinum gained 1.4 percent to $1,574.99 an ounce, partially recovering from the lowest since Jan. 7 at $1,545.25 hit on Tuesday after poor European car sales data and worries about the euro zone economy.

Spot palladium added 3 percent to $754.97, after tumbling 3.9 percent in the previous session, the sharpest one-day decline in nearly five months.