Gold slid, then cut losses, early on Wednesday after the Federal Reserve said it would extend its stimulus to a stalling US economic recovery but did not signal more aggressive monetary easing. The metal initially fell 1.5 percent on disappointment that the Fed did not announce a third round asset buybacks known as quantitative easing (QE3).
Investors have been betting on the use of gold as a hedge against economic uncertainty and currency depreciation risks brought by central bank actions. The statement concluding a two-day policy meeting said the Fed is renewing its effort to depress borrowing costs by selling short-term bonds to buy longer-dated ones, extending its program better known as "Operation Twist" to the end of 2012.
"At least for the near term, it's mainly a short-term negative for gold because it indicates that there won't be immediate and new aggressive accommodation, and certainly no QE3 at all judging from this statement," said Bill O'Neill, partner of commodities wealth manager LOGIC Advisors. Spot gold was down 0.1 percent at $1,614.40 an ounce by 1:29 pm EDT (1729 GMT), having earlier traded as low as $1,590.29. US gold futures for August delivery were down $7.70 an ounce at $1,615.50, with trading volume in line with its 30-day average, preliminary Reuters data showed.
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