PRECIOUS-Gold takes a breather as markets weigh Fed's policy stance

By Ashitha Shivaprasad

Sept 18 (Reuters) - Gold prices fell on Thursday due to profit-taking, after scaling a record peak in the previous session, as markets assessed the Federal Reserve’s stance on further interest rate cuts.

Spot gold XAU= was down 0.6% at $3,638.33 per ounce as of 9:41 am EDT (1341 GMT). U.S. gold futures GCcv1 for December delivery fell 1.3% to $3,670.40.

The previous session saw volatile trading, with spot prices briefly touching a record high of $3,707.40 before pulling back from those levels.

On Wednesday, the Fed delivered its first rate cut since December and opened the door to further easing, but tempered its message with warnings of sticky inflation, sowing doubt over the pace of future policy adjustments.

Fed Chair Jerome Powell described the policy move as a risk-management cut in response to a weakening labor market, but emphasized that the central bank is not in a hurry to begin easing.

"There was some confusion around Powell’s comment about the rate cut being a risk-management measure, and that uncertainty prompted profit-taking," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

"But, I do think (gold's) long-term bullish trend still remains and the setback from yesterday's all time high is corrective in nature... Every time gold make a new high, it just lends additional credence to the to the $4,000 objective."

Zero-yield gold, which tends to perform well in low-interest rate environments and during periods of uncertainty, has gained nearly 39% this year.

Analysts at SP Angel in a note reiterated that the current primary driver behind gold is the diversification of dollar reserves by BRIC central banks, most notably China.

"This trend is expected to continue, supporting gold prices whilst a lower dollar is also expected to provide a sustained tailwind," the note added. USD/

Elsewhere, data showed the number of Americans filing new applications for unemployment benefits fell last week.

Among other metals, spot silver XAG= fell 0.3% at $41.51 per ounce, platinum XPT= gained 0.9% to $1,376, and palladium XPD= was down 1.1% at $1,141.82.