NEW YORK: Gold slid nearly 2 percent to its lowest since late June as the US Federal Reserve took its first step in winding down the era of easy money that has helped drive bullion prices to record highs.

The US central bank modestly trimmed the pace of its monthly asset purchases, by $10 billion to $75 billion. In fresh quarterly forecasts, it also lowered its expectations for both inflation and unemployment over the next few years.

“A lot of gold investors are anticipating deflation not inflation as a result of the Fed announcement, taking advantage of the downside momentum and shorting gold at least temporarily,” said Jeffrey Sica, chief investment officer of New Jersey-based Sica Wealth with over $1 billion in client assets.

Gold extended its decline to a third consecutive day, and was the hardest hit of the major financial benchmarks by the taper. The S&P 500 equities index eased after ending at a record high on Wednesday, while the dollar index rose sharply for a second day.

Spot gold was down 1.8 percent at $1,196.31 an ounce by 1714 GMT, having earlier hit $1,193.60, its lowest since June 28.

Following its break of $1,200 an ounce, the metal is now less than $20 above its key support of $1,180.71 an ounce, a three-year low. Analysts said gold will be vulnerable to a much sharper pullback should prices drop below the level.

US Comex gold futures for February delivery were down $39.20 an ounce at $1,195.80, with trading volume on track to finish above its 30-day average, preliminary Reuters data showed.

Sean Corrigan, chief investment strategist at Switzerland-based Diapason Commodities Management, said that investors are seeing little argument in favor of gold at present.

Investors are continuing to sell out of gold-backed exchange-traded funds, which have seen outflows of some 800 tons this year to a 3-1/2 year low. The largest gold ETF, SPDR Gold Shares GLD, said its holdings fell another 4.2 tons on Wednesday.

Among other precious metals, silver was down 2.7 percent to $19.19 an ounce.

Platinum was down 1 percent at $1,317.25 an ounce, while palladium eased 0.3 percent to $693.25 an ounce.