Gold fell more than $4 in early trading in Asia on Wednesday to $516.00 an ounce as investors shrugged off possible inflationary concerns behind the latest US interest rate hike in favour of profits.
"Gold has had a good run and the Fed lifting rates by an expected quarter percentage point wasn't going to reverse the selling trend we've seen in recent days," Commonwealth Bank of Australia commodities analyst Tobin Gorey said.
"We're seeing a lot of book-squaring and portfolio readjustment away from gold as the end of the year approaches," he said. Gold an historical hedge against rising inflation hit its highest since 1981 at $540.90 an ounce on Monday as funds bought the metal on worries about rising energy costs and the stability of the dollar, but had recoiled to $520.60 by late New York trading on Tuesday.
Gold was last fixed in London at $522.50. "We're seeing profit-takers taking money off the table, but it's to call the rally in gold over for good," a trader said.
The US central bank's rate setting Federal Open Market Committee voted unanimously to lift the benchmark federal funds rate by a quarter-percentage point to 4.25 percent, the highest level since April 2001.
It was the 13th straight rate hike by the Fed. Analysts have said a change in the language policy makers use to explain their decision was the Fed.'s way of saying labour markets might be getting too tight sparking price rises.