* Gold has biggest monthly gain since January 2012
* Fed says economy recovering, but needs support
* GDP growth stronger than expected in 2nd quarter
* Coming up: U.S. weekly jobless claims Thursday
(New throughout, updates prices and market activity to monthly
close, adds more comments)
By Frank Tang and Clara Denina
NEW YORK/LONDON, July 31 Gold dropped in
volatile trading on Wednesday, tumbling early on
stronger-than-expected U.S. GDP data, then paring losses when
traders were relieved after the U.S. Federal Reserve ended a
policy meeting without any sign that its bond-buying program
would end soon.
Bullion ended July with a monthly gain of more than 7
percent, its biggest since January 2012. The metal rebounded
this monthly after three sharp monthly declines.
In a policy statement after its two-day meeting, the Fed
said the U.S. economy has been recovering but still needs
support. The U.S. central bank said it would keep buying $85
billion in mortgage and Treasury securities, citing challenges
such as a recent run-up in mortgage rates and federal
However, analysts noted that since gold pays no dividends or
interest, its price could remain under pressure due to its
ultra-sensitivity to interest rates.
"The signal today the Fed is still on track toward tapering
indicates that at some point we will see higher interest rates,"
said Ed Lashinski, director of global strategy and execution for
RBC Capital Markets' futures group.
"That's bearish for gold and it's going to limit the
market's ability to move a lot higher from here," said
Lashinski. He put the ceiling at the current rally at between
$1,330 and $1,350 an ounce.
At a June news conference, Chairman Ben Bernanke said the
Fed would probably start to curtail its current round of bond
buying later this year, with an eye toward bringing it to a
close by the middle of 2014.
Financial market participants had widely anticipated a
reduction of purchases at the Fed's next meeting on Sept. 17-18.
Spot gold was down 0.2 percent at $1,324.11 an ounce
by 4:15 p.m. EDT (2015 GMT). It traded as low as $1,305.30, the
weakest in more than a week, earlier in the day.
Prior to the Fed statement, U.S. gold futures for August
delivery settled down $11.60 at $1,312.40 an ounce, with
trading volume about 5 percent above its 30-day average,
preliminary Reuters data showed.
Gold investors now digest the Fed's policy-setting
committee's comment regarding its concern about the low level of
"The committee recognizes that inflation persistently below
its 2 percent objective could pose risks to economic
performance, but it anticipates that inflation will move back
toward its objective over the medium term," the Fed said.
Earlier in the session, gold dropped nearly 1 percent after
unexpectedly strong U.S. economic growth in the second quarter
stirred fears the Fed will taper its monetary stimulus.
The longer-term downtrend for gold will likely remain in
place as outflows have continued in gold-backed exchange-traded
products, said Robert Haworth, senior investment strategist at
U.S. Bank Wealth Management.
Reuters data showed the world's top gold ETFs have lost
around a quarter of their bullion holdings from a record high
reached in December 2012.
Among other precious metals, silver gained 0.6
percent to $19.82 an ounce. Platinum was down 51 cens to
$1,433.99 an ounce and palladium edged down 0.3 percent
to $725.25 an ounce.
4:15 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold AUG 1312.40 -11.60 -0.9 1304.90 1338.40 6,127
US Silver SEP 19.628 -0.052 -0.3 19.355 20.100 50,612
US Plat OCT 1429.30 -8.20 -0.6 1418.40 1449.90 7,844
US Pall SEP 726.35 -2.30 -0.3 722.30 738.85 3,827
Gold 1324.11 -2.58 -0.2 1305.30 1338.26
Silver 19.820 0.110 0.6 19.410 20.110
Platinum 1433.99 -0.51 0.0 1420.00 1446.00
Palladium 725.25 -2.02 -0.3 725.25 736.75
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 233,273 220,087 186,710 26.61 0.87
US Silver 54,248 59,732 55,353 30.4 0.64
US Platinum 7,933 14,696 12,545 23.79 0.00
US Palladium 3,967 4,321 5,352
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by Dale Hudson, Mark Potter, David Evans, Peter
Galloway, Andre Grenon and David Gregorio)