GOLD and silver fell hard overnight and early Thursday in London, dropping as European stock markets also fell and the US Dollar rose despite yesterday's latest "easy money" policy from the Federal Reserve.

Holding its key interest rate in the record low range of 0% to 0.25% for the 48th month running, the Fed's open market committee swapped its guidance for any rise in interest rates from mid-2015 to a target unemployment rate of 6.5% or below.

The Fed also confirmed it will begin a new round of quantitative easing in January, spending $45 billion per month to buy US government debt with no limit on the program's total purchases.

"Any QE should be positive for the yellow metal," said one wholesale gold dealer before Wednesday's announcement.

Yet after jumping $10 an ounce to a 2-week high of $1723 on the news, the Gold Price then fell back, dropping through $1700 at the start of Asian trade.

"What is behind this weakness?" asks Dubai-based gold dealer INTL FCStone.

"We suspect that with the Fed now on a prolonged easy stance, the lack of progress coming out of Washington with respect to the fiscal cliff talks [regarding $600bn of scheduled US spending cuts and tax hikes] is causing increasing concern.

"We would rather watch things from the sidelines for the time being, as the markets are getting too choppy to trade."

More than 60% of the new, open-ended QE program will be spent on medium and long-term US Treasury bonds, the New York Fed said yesterday.