Gold Prices Reverse Losses After Fed Announcement (Update 1)

Updated from 12:45 p.m. EDT with settlement prices

NEW YORK ( TheStreet) -- Gold prices were slightly higher Wednesday after the Federal Reserve's policy-making arm said it would leave interest rates effectively unchanged and continue quantitative easing.

Gold for December delivery was up $1.30 to $1,702.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price settled down earlier in the day $7.80 at $1,707.20. The gold price had traded as high as $1,715.20 and as low as $1,698.90 an ounce, while the spot price was dipping $4.90, according to Kitco's gold index.

"All eyes on the FOMC at the moment, that two-day meeting comes to an end today; nobody's really expecting anything new out of that," said Tim Harvey, senior vice president at ETF Securities U.S. "So I think that's just taken the focus off gold slightly in the short term."

Silver prices for December delivery fell 17 cents to $31.62 an ounce, while the U.S. dollar index was adding 0.01% to $79.93.

The Fed's implementation of an open-ended, mortgage-backed security purchasing program in September launched gold prices into their highest trading range in 2012, and offered enough positive sentiment to push the yellow metal near $1,800 an ounce. But uncertainty as to whether Spain would request a bailout from the European Central Bank, along with questions about Greece, a possible China slowdown and some improving economic indicators -- particularly in housing and an unexpected dip in unemployment -- have weighed on the precious metal.

A trio of bad headlines from Europe trounced the gold price on Tuesday.

"The market as a whole has been under a bit of pressure the past few sessions; we sort of failed to conquer $1,800 an ounce and I think a lot of people were expecting sort of the bullish momentum to continue higher," said James Moore, an analyst at FastMarkets.com. "So I think we've run into some stale liquidation."

Harvey and Moore, among many other analysts, believe that gold prices are still due for a climb in the near- to long-term. Continued quantitative easing by the Fed is viewed by many as an inherently inflationary policy, which would make gold the hedge. And many market analysts suggest that Spain will eventually ask for a bailout, though there is not a firm prediction on when it would occur.

Mixed economic news from China has made it difficult for investors to guess as to whether more easing from that country's central bank or more government stimulus policies would be on the docket over the coming weeks and months.

Harvey and Moore both noted that gold ETF demand has remained healthy, despite the recent retreat in gold prices. The suggestion on solid ETF demand is that investors are still willing to buy gold.

Technically, the fact that the gold price has held above the psychological level of $1,700 an ounce could mean sentiment in the yellow metal isn't quite ready to fall further.

Gold mining stocks were mostly lower on Wednesday. Shares of Goldcorp ( GG) fell 3.5%, while shares of NovaGold Resources ( NG) dipped 2.8%.

Among other mining stocks, Kinross Gold ( KGC) closed down 2.2%, and Barrick Gold ( ABX) was off 1.1%

Gold ETF SPDR Gold Trust ( GLD) shed 0.34%.

-- Written by Joe Deaux in New York.

>Contact by Email.

More from Gold

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Gold Prices Look 'Rich' at Current Levels - Here's What Could Change That

Watch This If You're Wondering How Much Gold to Have and When to Sell

Watch This If You're Wondering How Much Gold to Have and When to Sell

How Can Gold Continue This Upward Momentum?

How Can Gold Continue This Upward Momentum?

The Outlook for Gold Prices Looks Awful Even With 10-Year Yields Above 3%

The Outlook for Gold Prices Looks Awful Even With 10-Year Yields Above 3%

Gold Owes Everything to Investor Interest

Gold Owes Everything to Investor Interest