Gold price drifts lower after Fed sticks to taper

The gold price continued to drift lower on Wednesday, after a decision by the US Federal Reserve to continue reducing asset purchases under its economic stimulus program at the same rate of $10 billion a month.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery – the most active contract – last traded at $1,291.40 an ounce, showing little reaction to the move and down $5 from yesterday's close.

After a number of markedly quiet days volumes picked up slightly with 130,000 contracts of  100 troy ounces by mid-afternoon compared to a daily average of closer to 200,000 contracts.

The Federal Open Market Committee as widely expected announced a reduction of a further $10 billion to $45 billion a month of purchases under its quantitative easing program that has pumped more than $4 trillion of easy money into the US economy.

"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," the central bank said in a statement.

The statement was released only hours after official GDP number showed an abrupt slowdown in the US with first quarter growth barely positive at 0.1% and off sharply from the 2.6% growth in Q4 last year.

The bank’s QE stimulus program weakens the dollar and increases the risk of inflation, boosting gold allure as a hedge and storer of wealth.

The gold price has increased more than 50% since QE1 kicked off December 2008 when the ruling price was $837 an ounce.

The gold price has moved higher in 2014 and is still some 8% to the better for the year on safe haven buying amid the crisis in Ukraine and generally more positive sentiment after the dismal performance in 2013.