March 19, 2014 / 4:05 PM / in 4 years

PRECIOUS-Gold falls 2 pct as dollar jumps after Fed statement

* Gold drops further after Fed says to revamp rate guidance

* Bullion under pressure as Ukraine tensions ease

* Bullion posts biggest one-day fall since Jan. 30

* Coming up: US jobless claims, existing home sales Thurs (Updates prices and market activity)

By Frank Tang and Clara Denina

NEW YORK/LONDON, March 19 (Reuters) - Gold fell about 2 percent on Wednesday, its biggest one-day drop in three months, as the dollar rallied after the Federal Reserve dropped a set of guideposts it had been using to help the public anticipate when it would finally start bumping borrowing costs up from zero.

In announcing its view on future rates after a two-day policy meeting, the Fed also pushed forward with plans to slowly wind down its stimulus but said it will likely need to keep rates low even after the economy regains its health given lasting scars from the financial crisis.

“Gold’s appeal as an inflation hedge is not as strong after the Fed’s moves. It was already down on the reduction in geopolitical risk, so the combination of the two is pretty powerful,” said James Steel, chief precious metals analyst at HSBC.

Earlier in the session, gold came under pressure after Russian President Vladimir Putin signed a treaty on Tuesday making Crimea part of Russia again but said he did not plan to seize any other regions of Ukraine.

Spot gold fell 2 percent to $1,328.96 an ounce by 4:39 p.m. EDT (2039 GMT), its biggest one-day fall since Dec. 19.

Gold has lost nearly 4 percent in the last three sessions, partly due to profit-taking after its rally on tensions over Ukraine.

U.S. COMEX gold futures for April delivery settled down $17.70 at $1,341.30 an ounce, with trading volume about 30 percent above its 30-day average, preliminary Reuters data showed.

The U.S. central bank also proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.

The Fed said, however, that dropping a promise to hold rates steady “well past the time” the U.S. unemployment rate falls below 6.5 percent did not indicate any change in its policy intentions. Rather than relying on unemployment and inflation thresholds to guide expectations, it said would lean on a wide range of economic indicators in making its decision.

Yields of U.S. 10-year Treasuries rose sharply after the closely watched announcement from the Fed.

George Gero, vice president at RBC Capital Markets, said dropping the unemployment gauge and the continued tapering supported yields on the key 10-year Treasury bonds.

“Higher rates are anti-inflationary and not helpful to gold,” Gero said.

A stronger dollar also weighed on gold, with the dollar index jumping 0.7 percent after the Fed cut back bond purchases.

Ukraine worries, China’s first corporate bond default and fears of a slowdown in the world’s No. 2 economy helped gold gain 3 percent last week.

Year to date, the yellow metal has risen 10 percent after a 28-percent drop in 2013.

Among other precious metals, silver was down 0.9 percent to $20.59 an ounce. Platinum fell 0.7 percent to $1,441 an ounce, while palladium dropped 0.5 percent to $760.75 an ounce. 4:39 PM EST LAST/ NET PCT LOW HIGH CURRENT

SETTLE CHNG CHNG VOL US Gold APR 1341.30 -17.70 -1.3 1327.80 1360.20 185,970 US Silver MAY 20.826 -0.036 -0.2 20.505 20.965 51,593 US Plat APR 1451.70 -10.00 -0.7 1446.50 1468.50 12,506 US Pall JUN 768.20 -3.20 -0.4 762.60 774.15 4,874 Gold 1328.96 -26.68 -2.0 1328.35 1359.65 Silver 20.590 -0.180 -0.9 20.520 20.940 Platinum 1441.00 -9.50 -0.7 1446.50 1465.00 Palladium 760.75 -3.75 -0.5 763.50 771.50 TOTAL MARKET VOLUME 30-D ATM VOLATILITY

CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 212,841 167,787 185,073 17.76 0.00 US Silver 53,833 70,412 58,188 28.2 0.66 US Platinum 16,191 13,361 13,154 18.91 -0.79 US Palladium 4,907 7,880 5,667 21.98 -2.29 (Additional reporting by Lewa Pardomuan in Singapore; Editing by William Hardy, Stephen Powell and Meredith Mazzilli)

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