Gold futures settled modestly higher Wednesday, helped by a slightly weaker dollar index even as stocks reclaimed a portion of the sharp declines that marked the start to the week.
Prices for the yellow metal then headed lower in electronic trading. The Fed left a short-term U.S. interest rate unchanged as expected, but also said it expects inflation "to move up this year" in a sign it's likely to hike rates at its next meeting in March.
Read: Fed takes step toward rate hike as baton set to pass to Powell
February gold GCG8, +0.25% rose $3.60, or 0.3%, to settle at $1,339 an ounce ahead of the Fed announcement. For the month and year to date, the contract climbed roughly 2.3%. It moved briefly above $1,342 after the Fed news, before pulling back to trade below $1,335.
The April contract, GCJ8, +0.29% which is now the most active, settled $1,343.10 an ounce, up $3.10, or 0.2%. It traded at $1,340 about half an hour after the Fed announcement.
Gold's moves appeared to inversely match the dollar's reaction to the Fed statement. The ICE U.S. dollar index DXY, +0.00% a measure of the U.S. currency against a basket of six major rivals, had initially continued its decline, then traded up 0.1% at 89.272. Fluctuations in the greenback can impact the investment allure of dollar-denominated assets.
Rising Fed rates, and subsequently, rising yields, can also be seen as a negative for gold, in part because the commodity offers no yield and because rising yields can contribute to a stronger dollar.
"Although there was a slightly more hawkish tint to the Fed statement, noting their expectations for higher inflation, there were no significant surprises in the release," said Brien Lundin, editor of Gold Newsletter.
"While gold had a delayed-reaction dip after the news, I don't think it argues much against the longer-term, bullish story for the metal," he said. "The direction of the dollar remains the key for gold."
"With some Fed officials confirming that their goal is a fed funds rate of around 2.5%, there are only about four rate hikes left in its quiver," he said. "So long-term investors have already started betting on the euro, the yen and the pound, where central banks are set to begin their own quantitative tightening programs just as the Fed's is winding down."
Lundin said this will be "the biggest driver pushing gold prices higher over the coming year, even as, or if, the Fed is able to follow its plan for at least three rate hikes."
Early Wednesday, ADP's January report on private-sector employment showed the addition of 234,000 jobs in January, a reading that trimmed a sliver of gold's early advance. Economists use ADP's data to get a feeling for the Labor Department's employment report, which will be released Friday and covers government jobs in addition to the private sector. But lately, ADP has been volatile. The firm's estimate for December private payrolls was 104,000 more than the government data showed. A handful of other data hit Wednesday but had a limited impact on gold trading.
Stocks climbed on Wednesday after erasing over 500 points in two days. On Tuesday, the Dow DJIA, +0.14% suffered its biggest one-day drop in eight months, falling by about 363 points, or 1.4%.
Meanwhile, DoubleLine executives Jeffrey Gundlach and Jeffrey Sherman have renewed a largely bullish call for commodities and their caution for lofty stock levels.
Read: This chart from Gundlach's DoubleLine Capital says commodities are due to rally
In other metals action Wednesday, March silver SIH8, +0.23% surged 18.3 cents, or 1.1%, to settled at $17.241 an ounce, ahead of the Fed announcement.
The exchange-traded SPDR Gold Shares GLD, +0.33% rose 0.2%, while the silver-focused iShares Silver Trust SLV, -0.61%was 0.8% higher.
March copper HGH8, +0.11% tacked on 0.2% to $3.196 a pound and April platinum PLJ9, +0.00% settled at $1,004.30 an ounce, up nearly 0.3%.
Palladium was the lone decliner, with the March contract PAH8, +0.95% down nearly 2.8% at $1,023.55 an ounce, for a fifth losing session in a row.