Gold climbs as investors take Fed taper in stride

Gold recovered on Thursday from overnight losses prompted by the Federal Reserve's decision to cut back its stimulus, indicating that investors had already priced in a small reduction in the central bank's bond purchases.

Gold's reaction to the much-feared taper also showed that the metal was unlikely to deepen a 27 percent loss this year - its first annual drop in 13 years.

* Spot gold had risen 0.4 percent to $1,222.96 an ounce by 0021 GMT. It lost about 1 percent in the previous session, falling to its lowest since December 6, hurt by a stronger dollar and rallying equities.

* U.S. gold declined about 1 percent on Thursday, tracking overnight losses in spot gold.

* Bullion had been supported by the Fed's stimulus as the bond purchases burnished its inflation-hedge appeal.

* The Fed trimmed the pace of its monthly asset purchases by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.

* At his last scheduled news conference as Fed chairman, Ben Bernanke said the purchases would likely be cut at a "measured" pace through much of next year if job gains continued as expected, with the programme fully shuttered by late-2014.

* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 4.20 tonnes to 812.62 tonnes on Wednesday.

* The U.S. Senate passed a two-year budget deal to ease automatic spending cuts and reduce the risk of a government shutdown, but fights were already breaking out over how to implement the budget pact.

* Global markets have reacted surprisingly well to the long-dreaded decision by the Fed to trim its stimulus, with Wall Street stocks at record heights and the dollar above 104.00 yen for the first time since 2008.