Gold prices dropped for a second straight day as the government's latest efforts to aide the struggling banking industry has diminished the appeal of safety investments. The decline took the precious metal further away from a recently-visited four-month peak.
February gold fell to $888.20, down $11.30 on the session. The metal market closed before the Federal Open Market Committee announced it decided to keep its target range for the federal funds rate near zero, as expected.
The FOMC also warned conditions in the credit markets are "extremely tight," indicating that conditions have worsened since their December meeting. Voting to keep interest rates unchanged from their target range between zero and 0.25 percent, the Federal suggested that deflation could be a risk.
The dollar surged higher versus the euro on the news, rising to 1.3110 before quickly leveling off. The greenback also advanced versus the yen, rising to 90.60 from a week-long range near 89. The buck was able to pare a fraction of its weekly losses versus the sterling.
Earlier, President Obama pledged that his $825 billion Economic Recovery Package, slated for passage as early as mid-February, would assist corporations as well as middle class Americans.
Crude oil finished a choppy session moderately higher. Light sweet crude for March delivery moved to $42.16, up 58 cents on the session. Traders considered a mixed-bad inventory report that showed a sharp rise in crude stockpiles again, but also a slight drop in gasoline inventories.
Gold closed lower for the first time in four sessions on Tuesday and backed off a four-month high as traders showed they feel the recent rally may have been overdone. February gold finished at $899.50, down $9.30 for the session. The metal dipped as low as $892.20 earlier in the session.
