PRECIOUS-Gold drops after Fed cuts stimulus again

Wed Apr 30, 2014 5:42pm EDT

Related Topics

* Lack of surprise in Fed statement dents gold buying

* Fed cuts stimulus by $10 bln for fourth straight month

* U.S. economy stalls in Q1, cold weather a drag

* Coming up: U.S. April auto sales Friday (Adds comment, details on Fed statement, updates market activities)

By Frank Tang and Susan Thomas

NEW YORK/LONDON, April 30 (Reuters) - Gold fell on Wednesday after the U.S. Federal Reserve reinforced its view in the economy's prospects as it reduced its monthly bond purchases by another $10 billion, though the move disappointed bullion investors who had expected the central bank to slow tapering.

At the end of a two-day policy meeting, the Fed said the economy "will expand at a moderate pace and labor market conditions will continue to improve gradually" - an assessment that tracked its statement last month.

Still, traders said the gold market was frustrated at a lack of surprise in the latest Fed policy statement. Some gold investors had hoped the U.S. central bank would slow its measured withdrawal of stimulus due to economic uncertainty.

In addition, the central bank's forecast of a steadily improving U.S. economy pressured gold's appeal as an investment hedge, market watchers said.

"The status quo nature of the Fed commentary is keeping people confused about the short-term direction of gold," said Jeffrey Sica, chief investment officer at Sica Wealth, which manages over $1 billion in client assets.

Spot gold was down 0.4 percent at $1,290.70 an ounce by 4:32 p.m. EDT (2032 GMT).

For the month, gold prices edged up 0.6 percent as geopolitical tensions triggered some safe-haven demand.

Still, U.S. COMEX gold futures for June delivery settled down 40 cents at $1,295.90 an ounce.

The U.S. central bank said in a statement that it would reduce its monthly bond purchases to $45 billion from $55 billion, a widely expected decision that puts the progam on track to end as soon as October. The decision was unanimous.

"It was widely anticipated that the Fed would taper an additional $10 billion," said Dan Walsh, market strategist at Chicago brokerage RJ O'Brien.

US GROWTH SLOWS

Earlier, gold fell after the Commerce Department's report said that U.S. first-quarter gross domestic product expanded at the slowest pace since the fourth quarter of 2013.

Economists estimated that a harsh winter may have shaved as much as 1.4 percentage points off U.S. GDP growth, but data since the beginning of the second quarter has been positive.

Still, Sica said dismal U.S. data should underpin gold prices in the future as Fed policymakers can no longer blame economic weakness on the brutal winter.

Among other precious metals, silver underperformed gold, down 1.5 percent at $19.18 an ounce. Platinum fell 0.4 percent to $1,420 an ounce, and palladium edged up 0.5 percent to $806.50 an ounce. 4:32 PM EST LAST/ NET PCT LOW HIGH CURRENT

SETTLE CHNG CHNG VOL US Gold JUN 1295.90 -0.40 0.0 1284.90 1298.40 135,565 US Silver MAY 19.119 -0.369 -1.9 19.025 19.450 2,961 US Plat JUL 1427.90 -3.50 -0.2 1419.70 1431.20 7,091 US Pall JUN 812.50 4.60 0.6 798.50 812.75 4,624 Gold 1290.24 -5.74 -0.4 1286.10 1297.40 Silver 19.180 -0.290 -1.5 19.070 19.470 Platinum 1420.00 -5.30 -0.4 1420.50 1427.80 Palladium 806.50 4.00 0.5 799.50 811.00 TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 145,735 130,063 181,359 15.64 0.38 US Silver 54,545 63,220 55,989 20.72 -0.69 US Platinum 7,318 9,368 12,540 16.63 -0.01 US Palladium 5,171 5,424 5,652 25.76 -1.54 (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Robin Pomeroy, Pravin Char, Bernadette Baum and Diane Craft)

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