Gold drops slightly after Fed cuts stimulus

San Francisco (Apr 30)  Gold fell on Wednesday after the U.S. Federal Reserve reduced its monthly bond purchases by another $10 billion, a sign of its confidence in the economy's health, disappointing bullion investors who had expected the central bank to slow tapering.

At the end of a two-day policy meeting, the Fed said the economy "will expand at a moderate pace and labor market conditions will continue to improve gradually" - an assessment that tracked its statement last month.

The U.S. central bank said in a statement that it would reduce its monthly bond purchases to $45 billion from $55 billion, a widely expected decision that keeps it on track to end the program as soon as October. The decision was unanimous.

"It was widely anticipated that the Fed would taper an additional $10 billion," said Dan Walsh, market strategist at Chicago brokerage RJ O'Brien.

Still, traders said the gold market was frustrated at a lack of surprise in the latest Fed policy statement. Some gold investors had hoped the U.S. central bank would slow its measured withdrawal of stimulus due to economic uncertainty.

Spot gold was down 0.4 percent at $1,290.70 an ounce by 2:26 p.m. EDT (1826 GMT).

U.S. COMEX gold futures for June delivery settled down 40 cents at $1,295.90 an ounce.

Earlier, gold fell after the Commerce Department's report said that U.S. first-quarter gross domestic product expanded at the slowest pace since the fourth quarter of 2013.

Economists estimated that a harsh winter may have shaved as much as 1.4 percentage points off U.S. GDP growth, but data since the beginning of the second quarter has been positive.

Among other precious metals, silver underperformed gold, down 2.1 percent at $19.07 an ounce. Platinum fell 0.4 percent to $1,419.24 an ounce, and palladium edged up 0.5 percent to $806.22 an ounce.