Investing.com - Gold prices trimmed earlier losses sustained from an upbeat U.S. gross domestic product report on Wednesday as a dovish take from the Federal Reserve on the labor market bolstered the yellow metal's appeal as a hedge to loose monetary policy.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at 1,297.60 a troy ounce during U.S. trading, down 0.22%, up from a session low of $1,293.00 and off a high of $1,304.90.
The December contract settled down 0.41% at $1,300.50 on Tuesday.
Futures were likely to find support at $1,289.40 a troy ounce, Thursday's low, and resistance at $1,314.60, Monday's high.
Despite improvements taking place in the economy and in the jobs sector as well, slackness remains in the labor market, which prompted the Federal Reserve on Wednesday to stick with its policy of making $10 billion cuts to its monthly bond-buying program as the year unfolds.
The Fed is currently purchasing $25 billion in Treasury and mortgage debt securities a month to spur recovery, which tends to boost gold prices by keeping interest rates low.
Markets were hoping for a more upbeat take on the economy.
"Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources," the Fed's statement read.
Household spending is on the mend while business fixed investment is advancing, although recovery in the housing sector remains slow.
Fiscal policy continues to weigh on growth though the extent of which is diminishing, while consumer prices are stable.
"Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable," the statement read.
"The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat."
Gold fell earlier after data revealed the U.S. economy grew far more than expected in the second quarter.
The Commerce Department reported earlier that gross domestic product expanded at an annual rate of 4.0% in the three months to June, blowing past forecasts for a 3.0% reading. The contraction in the first quarter was revised to 2.1% from a previously reported 2.9%.
Personal consumption grew 2.5%, well above predictions of 1.9%, the report said, adding to the view that the economic recovery is gaining traction.
Separately, payroll processor ADP revealing that the U.S. private sector added 218,000 jobs in July, missing forecasts for a 230,000 reading.
Meanwhile, silver for September delivery was up 0.21% at $20.627 a troy ounce, while copper futures for September delivery were up 0.82% at $3.245 a pound.