Gold slides to 2-week low as Fed dashes hopes of rate cuts

Gold prices dropped to two-week lows on Thursday after the US Federal Reserve cut rates by 25 basis points as expected but tampered market expectations of a lengthy easing cycle, lifting the dollar to a two-year high.

Spot gold was down 0.2 percent at $1,410.42 per ounce as of 0259 GMT (0559am Riyadh time), after falling to its lowest since July 17 at $1,405.50.

US gold futures slipped 1.2 percent to $1,421 an ounce.

"Adopting the rate cuts the way they (Fed) primed is more like an insurance policy rather than a commencement of series of rate cuts that created a bit of uncertainty" said John Sharma, an economist with National Australia Bank.

As expected by markets, policymakers moved the US central bank's benchmark overnight lending rate to a target range of 2 percent to 2.25 percent, citing concerns about the global economy and muted US inflation.

However, Fed Chair Jerome Powell, speaking in a news conference after the release of the central bank's statement, characterized Wednesday's rate cut as "a mid-cycle adjustment to policy", a sign to markets that further sharp cuts were not imminent.

"The Fed was non-committal for the need for further rate cuts as such gold was sold off," said Heng Koon How, head of markets strategy at Singapore's United Overseas Bank.

"Our longer-term gold view remains positive. Over the near-term, we can expect gold to trade within the $1,400 to $1,450 range."

In the wake of Powell's comments, the dollar rose 0.3 percent to a two-year high on Thursday, making gold more expensive for holders of other currencies.

"The dollar has broken out on the charts and looks like it is going to push higher still, yet another reason to pursue caution when it comes to the long side in the precious group," INTL FCStone analyst, Edward Meir, said in a note.

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.18 percent to 823.42 tonnes on Wednesday from Tuesday.

Elsewhere, silver fell 0.5 percent to $16.17 per ounce, after touching a near two-week low of $16.10 earlier in the session.

Platinum dipped 0.5 percent to $855.25, after falling to its lowest since July 24 at $852.50, while palladium rose 0.3 percent to $1,521.03.