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Gold Sinks Ahead of Fed Announcement

NEW YORK (TheStreet) -- Gold prices were plummeting as profit-takers sank the yellow metal ahead of the Federal Reserve's policy-making announcement Wednesday afternoon.

Gold for June delivery at the COMEX division of the CME was dropping $27.90 to $1,444.20 an ounce. The gold price traded as high as $1,477.40 and as low as $1,442.80 an ounce, while the spot price was diving $32.50, according to Kitco's gold index.

"It's a lot of profit-taking ahead of the FOMC decision," said Howard Wen, precious metals analyst at HSBC Bank U.S.A.

Buyers in Asia didn't lend support to gold prices overnight as much of India and China recognized the May Day holiday.

"In terms of early trading, India and China are out on May Day, and so the traditional physical buyers didn't really provide much support there," said Wen.

The Fed is expected to make its policy-making announcement on the federal funds rate at 2 p.m. EDT. The previous meeting among Federal Open Market Committee members suggested more central bankers had warmed up to the idea of scaling back quantitative easing programs. Rumblings of a cutback had dinged gold prices as investors often view the precious metal as a hedge against inflation.

Many economists aren't expecting the Fed to make any changes to the current policy, and analysts suspect the central bank will step back from its calls to reduce monetary stimulus as U.S. economic data generally has been weaker than expected for the past month.

Silver prices for July delivery were sliding 85 cents to $23.34 an ounce, while the U.S. dollar index was dipping 0.17% to $81.59.

Gold ETFs SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) were dropping 2.1%.

-- Written by Joe Deaux in New York.

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