Gold Prices Slide on Fed Tapering Announcement

Gold prices dropped in London on January 28 after the Federal Reserve announced it would reduce its monthly bond buying to $65 billion from $75 billion. This move was seen as a continuation of the Fed's plan for gradual withdrawal from its unprecedented easing policy. As a result, gold fell by 0.8 percent to $1,257.24 an ounce in London.

The metal had risen 4.3 percent this month, but investors have been selling emerging-market assets since the Fed started tapering. This has led to some safe-haven demand for gold, but less stimulus is not positive for the metal. According to Wang Xiaoli, chief investment strategist at CITICS Futures Co., physical demand will be muted due to the Lunar New Year holiday in China.

Central banks from India to Turkey to South Africa raised borrowing costs this week to try to stem capital outflows. Gold prices had reached a two-month high of $1,279.61 on January 27 but declined after the Fed's announcement. Platinum also lost 0.4 percent to $1,257.40 on the Comex in New York.