Gold drops in volatile trade after Fed says to cut stimulus

NEW YORK (19/12) - Reuters - Gold fell about 1 percent in choppy trade on Wednesday, after the U.S. Federal Reserve lowered its inflation forecast and signalled better prospects for the economy as it announced plans to trim its bond-buying stimulus.

In what amounts to the beginning of the end of its unprecedented support for the U.S. economy, the central bank said it would reduce its monthly asset purchases by $10 billion, bringing them down to $75 billion. Bullion initially rose after the U.S. central bank said it 'likely will be appropriate' to keep overnight rates near zero 'well past the time' that the jobless rate falls below 6.5 percent, especially if inflation expectations remain below target. The metal tumbled in late sessions as the dollar extended its rally and the S&P 500 equities index rose nearly 2 percent to close at a record high. Spot gold was down 0.8 percent at $1,219.21 an ounce by 4:15 p.m. EST (2115 GMT). Its session low was $1,215.70, only $4 above a five-month low of $1,211.44 set on Dec. 4. U.S. gold futures for February delivery settled up $4.90 an ounce at $1,235 prior to the Fed announcement. Turnover was weak, considering the volatile gold market. Trading volume was about 10 percent below its 30-day average, preliminary Reuters data showed. http://www.reuters.com/article/2013/12/18/markets-precious-idUSL3N0JX1Z720131218