Investing.com - Gold prices softened on Wednesday after the Federal Reserve said it was trimming its monthly bond-buying program to $45 billion on the view that the economy is improving and is in less need of monetary stimulus.
Fed bond purchases bolster gold prices by weakening the dollar, as the two assets tend to trade inversely with one another.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery traded at 1,292.20 a troy ounce during U.S. trading, down 0.32%, up from a session low of $1,285.10 and off a high of $1,298.20.
The June contract settled down 0.21% at $1,296.30 on Tuesday.
Futures were likely to find support at $1,268.60 a troy ounce, Thursday''s low, and resistance at $1,306.50, Monday''s high.
While the unemployment rate remains elevated, the labor market is improving, while fiscal factors that have weighed on recovery in the past are diminishing as well, the Federal Open Market Committee, the Fed''s rate-setting body, said in a statement.
"Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement," the Fed said in its statement.
While the unemployment rate still remains elevated, the broader economy continues to improve albeit at an uneven pace, which prompted the Fed to trim its monetary stimulus program.
"Household spending appears to be rising more quickly. Business fixed investment edged down, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee''s longer-run objective, but longer-term inflation expectations have remained stable.
Gold prices remained lower on the news, though prices didn''t plummet as a $10 billion cut to the stimulus program came as little surprise to many.
Furthermore, the Fed stressed that even when the bond-buying programs wraps up, interest rates will remain very low for some time afterward, which cushioned the yellow metal''s losses.
"The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee''s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored," the Fed statement read.
"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
Elsewhere on Wednesday, the Bureau of Economic Analysis reported that U.S. gross domestic product grew at an annual rate of 0.1% in the first quarter, far shy of expectations for a 1.2% growth rate.
Still, Fed language suggesting that rough winter weather made the economy look worse than it was tarnished gold''s appeal.
Meanwhile, silver for July delivery was down 1.87% at US$19.173 a troy ounce, while copper futures for July delivery were down 1.47% at US$3.028 a pound.
Please LIKE our Facebook page - it makes us stronger: