Gold for December delivery, the most active contract, slid $1.10, or 0.1%, to end at $1,014.40 an ounce on the Comex division of the New York Mercantile Exchange. It was last up 0.4% at $1,018.20 in electronic trading. The thinly traded September contract ended down $1.20, or 0.1%, at $1,013. In a statement released after a two-day policy meeting, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. It also announced that it has extended its purchase of mortgage-backed securities and agency debt into the first quarter of 2010 from December. "I see the Fed's extension of the mortgage backed security purchase program as a de facto easing," said Brian Kelly, chief executive of Kanundrum Research, a commodities and macroeconomic research firm. "The reaction in the dollar is clearly supporting this view, and the weakness in the dollar is also contributing to the strength in the gold market," he added. "With the benevolent tailwind of a weak dollar, gold could easily trade to $1200 an ounce." In the statement, Fed officials said that economic activity has "picked up" with improved conditions in financial markets. It also said that it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." See full story. Lower interest rates tend to hurt the dollar and boost gold's value as a hedge against a weak currency and inflation. Gold rose as "buyers see long-term rates to be low, helping the economies and keeping dollar on the defensive," said George Gero, a precious-metals trader for RBC Capital Markets. "Volume was low during Comex [floor] hours, and most buyers waited until the Fed statement came out before acting." The September contract had risen to $1,019.80 last Wednesday, an all-time high for a nearby Comex gold contract, while the December contract topped $1,020 an ounce. "Further weakness in the greenback could see the metal breach last week's high," said James Moore, analyst at TheBullionDesk.com in a note. In Wednesday's currency trading, the dollar erased its earlier gains, falling further after hitting a one-year low against the euro in the previous session. The dollar index (DXY 76.30, +0.25, +0.33%) was down 0.2% at 75.978. See Currencies. Holdings in the SPDR Gold Trust (GLD 98.83, -0.84, -0.84%) , the biggest gold exchange-traded fund, stood at a two-month high of 1,101.73 metric tons on Tuesday, unchanged from a day ago. In other metals, December silver sank 20.5 cents, or 1.2%, to end at $16.91 an ounce and October platinum declined $11.40, or 0.9%, to $1,327.80 an ounce. December palladium fell $4.75, or 1.6%, to $297.65 an ounce. December copper dropped 5.65 cents, or 2%, to $2.808 a pound.

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