NEW YORK (TheStreet) -- Gold prices slammed by a stronger U.S. dollar erasing Wednesday's gains.

The

Federal Reserve's

announcement Wednesday that it would keep

interest rates low

and money cheap for an extended period of time

lifted gold prices

. February prices, the most actively traded contract, settled at $1,136.20. The longer rates stay low the higher the likelihood of inflation. Investors historically buy gold during times of inflation as an alternative hard asset.

The Fed did set the stage for rate tightening down the road by giving a more upbeat view on the economy and upgrading the labor market. Some analysts view the Fed's statement as a passive tightening to remove low rates sooner than expected. The

U.S. dollar index

was rising .99% to $77.67. The stronger dollar and profit taking put pressure on gold prices keeping the precious metal confined to the $1,110/$1,140 range. "There is always going to be some year-end profit taking", argues J.C. Doody, editor of goldstockanalyst.com. "But a $20 change in gold price on top of $1,140 numbers is less than 2%. It's really trading noise....I think it's going to be choppy till the end of the year. Typically the gold stocks rally in the last week of the year."

Gold prices were falling $15.80 to $1,120.40 at the Comex division of the New York Mercantile Exchange. The contract has traded as high as $1,142.90 and as low as $1,113.80.

Silver prices

were down 18 cents to $17.51 while copper was giving up 5 cents to $3.15.

Mining stocks, a more leveraged way to

invest in gold

, were down with the broader equities markets.

Barrick Gold

(ABX)

and

Newmont Mining

(NEM) - Get Report

TST Recommends

were flat at $39.15 and $49.72 respectively. Shares of

Freeport McMoran Copper & Gold

(FCX) - Get Report

were slightly down 2% at $78.20 and

Yamana Gold

(AUY) - Get Report

was sliding 4% to $11.64.

SPDR Gold Shares

(GLD) - Get Report

, the most popular physically backed ETF, was lower by 1.73% to $109.66. The ETF added almost 4 tons on Wednesday as investors bought gold as an inflation hedge.The mining ETFs,

Market Vectors Gold Miners

(GDX) - Get Report

and

Market Vectors Juniors

(GDXJ) - Get Report

, TSC contributor Don Dion's favorite way to

invest in gold

, were struggling down 4% to $46.32 and $25.44 respectively.

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>>More stories on gold investing

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Written by Alix Steel in New York

.