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London: Gold fell for a second day, while sustaining its hold above $1,400 an ounce, after the Federal Reserve signalled it probably won’t embark on a lengthy easing cycle following the first rate cut since the financial crisis.

The drop came as investors reacted to the bank paring the target range for the benchmark rate by a quarter point, a move that was widely expected. Still, markets were whipsawed on remarks from Fed Chairman Jerome Powell, who struggled to define the path ahead. Two Fed rate-setters dissented.

“The Fed poured cold water on the market and we are seeing a reversal in most asset classes, gold included,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “Overall, it appears that the Fed is not entirely sure of its future policies in the near-term,” he said, adding: “An unclear Fed means confused markets, and I expect volatility to be high in the near term.”

Gold’s facing a setback after rallying in recent months to a six-year high as central banks globally signalled that looser monetary policy is needed to boost growth. Powell said the quarter-point reduction amounted to a “midterm policy adjustment,” fuelling speculation the central bank is not necessarily at the start of an easing cycle, but he also said the Fed hasn’t ruled out further cuts. A gauge of the dollar rose to the highest level in two months.

“Gold had become somewhat overbought in the short term and was due a correction,” said Mark O’Byrne, research director at GoldCore, adding that he sees gold falling as low as $1,350. Still, “given the uncertain political and economic backdrop and growing demand globally, we expect this sell-off to be short and relatively shallow.”

Spot gold declined as much as 0.8 per cent to $1,402.94 an ounce and was at $1,407.64 at 11:54am in London. In July, the precious metal hit $1,453.09, the highest intraday price since May 2013, and it’s still up almost 10 per cent this year. Silver lost 1.6 per cent to $16.0044 an ounce, while platinum and palladium also dropped.

While the initial gold market reaction may be to sell off early this month, the outcome is “largely neutral” for the precious metal at current levels, Citigroup Inc. said in a note. The bank maintained its third-quarter average price forecast of $1,425 and its zero-to-three month point-price target of $1,450. Investors will now seek further clarity from the Fed, as well as tracking macroeconomic data releases and the US-China trade fight.