The central bank however held its benchmark short-term interest rate near zero and said it will continue to buy $120 billion in bonds each month to fuel the economic recovery
Gold prices slipped over 1% on Wednesday after U.S Federal Reserve officials brought forward projections for the first post-pandemic interest rate hikes into 2023.
Spot gold fell 1.1% to $1,839.06 per ounce by 2:42 pm EDT (1842 GMT), having earlier hit its lowest level since May 14 at $1,833.65.U.S. gold futures settled up 0.3% at $1,861.40.
In its new projections, 11 out of 18 Fed officials projected at least two quarter-point interest rate increases for 2023, even as officials in their statement pledged to keep policy supportive for now to encourage an ongoing jobs recovery.
"The Fed has a gameplan that they're going to be a removing all this accommodation and it's just this initial knee jerk reaction (in gold)" said Edward Moya, senior market analyst at OANDA, adding that the Fed was more hawkish than markets expected and gold could fall further towards $1,830.
The central bank however held its benchmark short-term interest rate near zero and said it will continue to buy $120 billion in bonds each month to fuel the economic recovery.
Gold was further bruised by a jump in the dollar and yields after the announcement. Higher yields raise the opportunity cost of holding non-yielding bullion.
"But the Fed is not going to be leading the charge in tightening against other major central banks and it will be one of the last to tighten, allowing for dollar weakness to remain fully intact" which should support gold, Moya said.
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