Spot gold slipped on Thursday on dollar rally after Fed decision

Spot gold slipped on Thursday under the weight of a rallying dollar, after falling more than 1% in the previous session when the US Federal Reserve announced its plan to load up long-term securities and offered a grim economic outlook. Warning of “significant” downside economic risks, the US central bank said it would launch a $400 billion programme to shift its $2.85 trillion balance sheet more heavily towards longer-term debt.

The decision disappointed investors who had hoped for stronger stimulus measures, prompting a slide in stocks and commodity prices.

The worries about the euro zone’s debt crisis continue to support the safe haven appeal of gold, but momentum is lacking for bullion to
march towards its record high above $1,900.

“For the short term, gold is likely to remain in the range of $1,750 and $1,850,” said Ong Yi Ling, an analyst at Phillip Futures.
“If we do see $1,700, that could potentially cause a greater correction to $1,500.”

Spot gold lost 0.3% to $1,775.40 an ounce by 0609 GMT, extending a 1.2% decline in the previous session.

The most active US gold futures contract fell as much as 2% to $1,772.5, before recovering to $1,778.20.

Technical indicators bode ill for gold prices. Spot gold prices could fall towards $1,730 during the day, said Reuters market analyst Wang Tao.

The dollar index rose to a seven-month high as investors piled into the greenback, lured by the appeal of short-term rates on US bonds after the Fed announcement.

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