Gold falls as Fed keeps interest rates unchanged

Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday ahead of the U.S. Federal Reserve's announcement to keep interest rates unchanged.

The most active gold contract for June delivery slipped 8.5 U.S. dollars, or 0.68 percent, to settle at 1,248.50 dollars per ounce.

The U.S. Dollar Index rose by 0.12 percent to 99.07 as of 18:00 GMT. The index is a measure of the dollar against a basket of other major currencies.

Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.

The down-turn of gold futures was also a result of the stock market rally. The Dow Jones Industrial Average kept an up-beat tone for most time of the morning session. Analysts note that when equities post gains, the precious metal usually goes down.

The precious metal slipped further in electronic trading as the U.S. dollar strengthened against other currencies following the Fed's monetary policy statement.

"In view of realized and expected labor market conditions and inflation," said the Fed, it "decided to maintain the target range for the federal funds rate at 0.75 to 1 percent."

"The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation," the Fed added in an announcement released at 18:00 GMT.

The Fed viewed the slowing in growth during the first quarter as "likely to be transitory," saying it will pursue gradual adjustments in the stance of monetary policy. Endit