July 30, 2014 / 10:25 AM / 3 years ago

CORRECTED-PRECIOUS-Gold traders brush aside signs Fed in no hurry to raise rates

(Corrects spot gold price in paragraph 2)

* Central bank reaffirms no rush to raise interest rates

* Traders largely shrug off Fed statement

* U.S. economy expands 4 percent in second quarter

By Akane Otani and Clara Denina

NEW YORK/LONDON, July 30 (Reuters) - Gold futures ended lower on Wednesday, but traders largely shrugged off a statement from the Federal Reserve hinting the U.S. central bank was in no rush to hike interest rates, which would reduce appetite for the precious metal.

Spot gold maintained earlier losses and was down 0.2 percent at $1,295.79 an ounce by 2:34 p.m. EDT (1834 GMT), below the previous close of $1,298.10. Prices were under pressure throughout much of the session after quarterly U.S. economic growth accelerated more than expected.

Following a two-day meeting that ended on Wednesday, Fed policymakers reiterated concerns about slack in the labor market and reaffirmed it will not hurry to raise rates.

Higher rates would encourage investors to withdraw money from non-interest-bearing assets such as gold. The metal hit record highs after the Fed slashed rates in the wake of the financial crisis.

The central bank pressed ahead with a plan to wind down its bond-buying stimulus, in line with market expectations. It has typically cut $10 billion from its monthly bond-buying program at each recent policy meeting.

“The bottom line continues to reflect the idea that rates will probably remain low for an extended period,” said Bill O‘Neill, managing partner at LOGIC Advisors.

Even so, expectations remain that the Fed will tighten policy later in the year and threaten to pressure gold, O‘Neill said.

In earlier trade, prices fell on a report that U.S. gross domestic product expanded at a 4.0 percent annual rate in the second quarter, compared with economists’ consensus forecast for 3.0 percent growth.

U.S. gold futures closed down $3.40, or 0.3 percent, at $1,294.90 an ounce.

The metal was headed for a 2 percent monthly loss after a gain of around 6 percent in June, when international political tensions prompted risk-averse investors to seek gold.

The dollar maintained gains after the Fed statement. It had climbed after the unexpected jump in U.S. economic growth overshadowed a weak report on the labor market.

Signs of economic recovery could eventually weaken investors’ appetite for gold because it does not bear interest.

Low volumes muffled dramatic price reactions, said James Steel, chief precious metals analyst for HSBC.

The next big focus will be the release of July non-farm payrolls data on Friday, which is expected to signal further that the world’s biggest economy is on a steady recovery path.

Spot silver was up 0.2 percent to $20.55 an ounce. Platinum rose 0.1 percent to $1,474.40 an ounce, and palladium gained 0.02 percent to $875.40 an ounce.

Markets were also keeping an eye on whether tensions would worsen in the Middle East and Ukraine after the European Union and the United States announced further sanctions on Tuesday against Russia. (Additional reporting by A. Ananthalakshmi in Singapore and Chris Prentice in New York; Editing by Keiron Henderson, Bernadette Baum and Jonathan Oatis)

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