Gold rises in choppy trade after Fed decision
Gold rose on Wednesday, extending gains after the US Federal Reserve announced plans to trim its aggressive bond-buying program, but sought to temper the long-awaited move by suggesting its key interest rate would stay lower for even longer than previously promised.
In what amounts to the beginning of the end of its unprecedented support for the US economy, the central bank said it would reduce its monthly asset purchases by $10 billion, bringing them down to $75 billion. (Read more)
But in a move likely meant to forestall any sharp market reaction that could undercut the recovery, the central bank also said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the jobless rate falls below 6.5 per cent.
"Gold prices initially fell in a knee-jerk response, but it quickly rebounded, tracking the equity market, while the dollar fell against the euro," said Axel Merk, portfolio manager of California-based Merk Funds, which has about $450 million worth of assets under management.
"The reason gold is doing well because the Fed is all but promising to be behind the curve in raising interest rates when inflation does pick up," Mr Merk said.
Spot gold was up 0.5 per cent at $1,236.10 an ounce by 1947 GMT.
US gold futures for February delivery settled up $4.90 an ounce at $1,235.
Trading volume was about 20 per cent below its 30-day average, preliminary Reuters data showed.
Copyright @ Thomson Reuters 2013
