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(Kitco News) - Gold prices tumbled in electronic trade Wednesday in the North American afternoon after the Federal Reserve left interest rates unchanged and maintained that it sees interest rates low through late-2014.

December gold futures on the Comex division of the New York Mercantile Exchange were $1,605.50 at 3:13  p.m. EDT, down from the day-session settlement price of $1,614.60, but up from a session low of $1,595.  September silver also extended losses and fell to $27.380, versus a settlement price of $27.914 an ounce. Platinum group metals followed suit.

The Federal Open Market Committee downgraded its view on the U.S. economy, saying economic activity had decelerated. Previously it said the economy was expanding moderately. In a surprise move, the Fed left its pledge to keep its benchmark federal funds rate at exceptionally low levels through late-2014. It was expected the Fed would extend that plan out until 2105. The benchmark rate was left at zero to 0.15%, where it’s been since December 2008.

“The more somber assessment coupled with the … declared willingness to provide additional accommodation as needed keeps the door more than a little ajar for further action. This will reinforce the focus on (Federal Reserve Chairman Ben) Bernanke's speech at Jackson Hole, where in 2010 he provided a strong indication that QE2 (second round of quantitative easing) was coming,” said Marc Chandler, global head of currency strategy, Brown Brothers Harriman.

Financial and commodity markets fell on the news, while the U.S. dollar rose.

“The metals markets were disappointed that the Fed chose not act at today’s meeting. The idea of further stimulus was anticipated and the market priced that in last week, so we’re taking some of that stimulus premium out,” said Dave Meger, director of metals trading at Vision Financial Markets.

Meger said earlier in the session gold and silver started to sink and that probably occurred on the idea that the Fed wasn’t going to act Wednesday.

He said, though, that there’s still a strong fundamental background for gold and silver because the Fed stands ready to act if need be. That makes data like Friday’s monthly employment report important as these reports will give market participants a sense of the health of the economy.

Sean Lusk, equity index analyst who also tracks metals at Iron Beam, said there was just a knee-jerk reaction lower, but that the afternoon weakness wasn’t surprising.

“Much of this was the same old story,” Lusk said.

Like Meger, Lusk said that the markets will now watch Friday’s monthly employment figures for direction. “If we get another weak jobs number, we could see gold really rally like it did (this spring) when we got a surprisingly low number. If we get a jobs number that is only 40, 50, 60,000 jobs created and the previous month’s data revised lower, I think we’ll see gold take off,” he said.

A survey by MarketWatch suggests that Friday’s July employment data will show the unemployment rate remaining at 8.2%, with 100,000 jobs created.

Kevin Grady, owner of Phoenix Futures and Options, said the Fed’s decision to stand pat was appropriate, given that the European Central Bank meets Thursday. He said the Fed will want to see what the ECB does to handle its sovereign debt crisis, especially after last week’s comments by ECB President Mario Draghi to do whatever it takes to save the euro. Like others said prior to the Fed meeting, Grady said he expects the Fed to take stronger action in September.

“I’m very interest to hear what he (Draghi) has to say tomorrow. I think he’s in a very strong position with his finger on the pulse. I’m hoping for something positive,” Grady said.

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By Debbie Carlson of Kitco News dcarlson@kitco.com

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