Gold price weakens on US rate decision
Gold was trending lower on Wednesday after a US Federal Reserve interest rate decision indicated a rate rise as early as June next year and pointed to continued low inflation.
In late afternoon trade on the Comex division of the New York Mercantile Exchange gold for February delivery was changing hands for $1,186.60 an ounce, down $7.70 or 0.7% from Tuesday's close after recovering from a dip to $1,182.
The rate-setting Federal Open Market Committee scrapped its forecast that it will keep low interest rates for a "considerable time," but in new language designed to reassure markets the FOMC said it can be "patient" in deciding when to start raising rates.
The reaction on gold markets were relatively subdued given that higher interest rates is a big negative for gold which produces no yield and is strongly inversely correlated.
The FOMC also lowered its forecast for inflation over the shorter term, another blow to gold bulls who consider the metal as a hedge against rising prices.
The Fed decision also gave another boost to the already rampant US dollar which surged on the news to within shouting distance of more than 8-year high against the currencies of its major trading partners.
Gold and the dollar usually move in opposite directions.
After gains earlier in the day in after hours trade crude oil slipped again with the US benchmark West Texas Intermediate dipping to $55.90 a barrel from a day high of $58.98. Gold and oil prices tend to move in tandem and gold was beginning to look expensive compared to crude.
Another factor that adds pressure to the gold price is a fresh climb in US equities with the Dow Jones enjoying its best day of 2014 and the broader S&P500 index advancing over 2%.