Gold prices briefly rose to a session high after the Fed said it would end its $600 billion bond buying stimulus program in June while saying it is in no rush to raise short-terminterest rates it has kept near zero to support the US economy.
The announcement after the Fed's two-day meeting was largely in line with traders expectations, leaving investors waiting to hear more on the outlook for monetary policy from chairman Ben Bernanke when he gives the central bank's first post-decision news conference later in the day.
Spot gold was last up 0.8 percent at $1,513.00 an ounce by 1:04 EDT (1705 GMT), about 0.7 percent below Monday's record high at $1,518.10 an ounce. US futures for June delivery were last up 0.7 percent at $1,513.10.
With the dollar under pressure and its inverse link to gold strengthening for the first time in a week, the bullion price was set for a second day of gains, although a string of public holidays in the United Kingdom restricted volumes.
‘We've seen yet again the dollar under pressure ahead of that statement and precious metals definitely benefiting and base metals soggy,’ said Credit Suisse analyst Tom Kendall.
Kendsall said the key drivers for the gold price remained in place.
‘It is the dollar, it is sovereign debt, whether that is the US or the periphery of Europe. It is headline rates of inflation in emerging markets and developed markets and it is a bit of geopolitical uncertainty.’
Gold prices have risen to a series of record highs in recent weeks, while silver hit a 33-year peak on Monday, before displaying it's characteristic volatility by falling by as much as 4.9 percent in the next session, its largest one-day fall in a month.
Still, the white metal is on track for a 21-percent gain this month and a 47-percent rise this year, making it the top performing precious metal and commodity of 2011.
‘(Silver) is definitely in a period of consolidation and I think it would be healthy for the market to trade broadly sideways for at least a few days,’ said Kendall. ‘I suspect maybe we will see the focus come back on gold in the short term.’
Dealers in Asia said strong physical demand was offering some support to silver, although holdings of silver in the world's largest exchange-traded funds staged their largest one-day outflow in nearly two weeks by April 26.
Spot silver was up 0.5 percent at $45.73 an ounce, while US silver was last up 1.6 percent at $45.78.
Implied volatility in silver options has been at its highest this week since November last year as the spot price has swung from lows around $43 to highs above $49 in the space of a week.
‘The recent sharp increase in volatility is an indication of the increasing nervousness of market players and could be a sign that the rally in the silver price is approaching an end,’ said Commerzbank in a note.
Platinum was last up 1 percent at $1,818.48 an ounce, while palladium was also up 1 percent at $758.52.