Gold futures pared some of the losses but still settled lower Wednesday, after the Federal Reserve left its interest rate unchanged and extended Operation Twist bond swapping program citing a slowdown in jobs. The program was due to expire end this month.
Faced with a fragile economic recovery that may be losing steam, the Federal Reserve on Wednesday extended its Operation Twist bond swapping program. In an effort to thaw credit markets and keep real interest rates low, the Fed will continue to sell billions in short-term bonds and use the funds to buy longer-term securities investments through 2012.
The central bank kept its benchmark interest rate at effectively zero, and reiterated that economic slack will probably warrant "exceptionally low" interest rates through at least late 2014.
Gold for August delivery, the most actively traded contract, dropped $7.40 or 0.5 percent to close at $1,615.80 an ounce Wednesday on the Comex division of the New York Mercantile Exchange.
Gold traded at an intraday high of $1,623.60 an ounce and a low of $1,590.50 an ounce.
Yesterday, gold ended marginally lower ahead of the two-day Federal Open Market Committee meeting.
The dollar index, which tracks the U.S. unit against six major currencies, was trading at 81.419 on Wednesday, up from 81.365 in North American trade late Tuesday. The dollar scaled a high of 81.74 intraday and a low of 81.22.
The euro pared early losses to trade higher on comments attributed to German Chancellor Angela Merkel, where she is purported to have said the European Financial Stability Facility may be used to buy eurozone sovereign bonds on the secondary markets.
The euro traded higher against the dollar at $1.2708 on Wednesday, as compared to $1.2686 late Tuesday. The euro scaled a high of $1.2743 intraday and a low of 1.2638.
In economic news from the eurozone, Germany's producer price inflation slowed more than expected to 2.1 percent in May, Destatis said. Economists expected the inflation to ease to 2.2 percent from 2.4 percent in April.
From the U.K., policymakers of the Bank of England decided to retain the size of quantitative easing unchanged in a split vote, minutes of the meeting showed. Four members of the Monetary Policy Committee sought more stimulus, while five members voted to maintain the QE intact at GBP 325 billion.
by RTT Staff Writer
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