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Homemetal commoditiesGold settles nearly 1% lower as Fed fears grip market

Gold settles nearly 1% lower as Fed fears grip market

Gold settled about 1 percent lower on Tuesday, dragged by firmer equities after renewed talk that the Federal Reserve may announce a further cut in its bond-buying program at its meeting next week.

The Fed's Federal Open Market Committee (FOMC) meets on Jan. 28-29. In its last policy meeting in December, the U.S. central bank decided to cut its monthly bond purchases by $10 billion to $75 billion. A report in the Wall Street Journal said the central bank was on track to pare the program for the second time in six weeks by another $10 billion a month to $65 billion.

Chart: Precious Metals

Quantitative easing measures have been crucial to gold's gains during the credit crunch years, as central bank liquidity and a low interest rate environment encouraged investors to put money into non-interest-bearing assets.

Spot gold dropped 0.9 percent to $1,242 an ounce, not far from the six-week peak of $1,259.85 it touched on Monday. U.S. gold futures for February delivery settled 0.8 percent lower at $1,241.80 an ounce.

The dollar was 0.1 percent lower versus a basket of other currencies, while European shares hit fresh 5-1/2 year highs, tracking Asian shares higher.

Gold purchases in China, the world's biggest buyer of the metal, have slowed from last week's levels as gold prices have gained for four straight weeks. Premiums for 99.99 percent purity gold on the Shanghai Gold Exchange fell to about $13 from Monday's $14, though volumes were higher.

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