(Reuters) - Gold prices ended a shade higher after a choppy session on Wednesday, as an encouraging assessment of the U.S. economy by the Federal Reserve wiped out the safe-haven metal's early peak at a one-month high built on speculation of more monetary easing from central banks.
The metal fell more than $20 an ounce or 1 percent from the month-high earlier in the session after the Fed said in its latest "Beige Book" summary of national activity that economic growth picked up over the last two months and hiring showed signs of a modest increase.
Silver outperformed gold and finished up 3 percent as U.S. equities and industrial commodities rallied on better economic sentiment on growing hopes of a European bailout for Spain's troubled banks.
Some investors lessened their bullish bets on gold after its 4.3 percent rally on Friday, when surprisingly weak U.S. payrolls data reignited talk of another round of monetary easing from the Federal Reserve. Traders said gold could further unwind its gains if central banks do not commit to more stimulus.
"The Beige Book indicated that the economic condition was better than what was priced in with the weak payrolls data, and that removed some of the premium based on an imminent Fed action," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC.
Spot gold was up 0.1 percent at $1,618.40 an ounce by 3:19 p.m. EDT (1919 GMT), after hitting a high of $1,640.50 an ounce, which marked the strongest price since May 7.
On the charts, gold found support at its 50-day moving average near $1,618 an ounce, and analysts said a bullish double-bottom pattern also underpinned buying.
U.S. COMEX gold futures for August delivery settled up $17.30 an ounce at $1,634.20, with trading volume set to be the highest so far this week, preliminary Reuters data showed, as trading desks in Britain returned from a two-day holiday.
The metal was also under pressure as investors digested news that the European Central Bank put the onus firmly on euro zone governments to solve the bloc's debt crisis, dashing expectations it could take near-term action.
SILVER FOLLOWS BASE METALS, WALL ST
Silver performed better than gold because of its heavy use as an industrial metal. Spot silver rose 2.8 percent to $29.29 an ounce, having touched its highest since May 8 at $29.94 an ounce, as it took the lead from copper and other base metals.
Last Friday's dismal U.S. nonfarm payrolls data has pressured the Fed to do more to help a slowing U.S. economy. Atlanta Fed President Dennis Lockhart said on Wednesday that the U.S. central bank may need to ease monetary policy further if a wobbly U.S. economy falters or Europe's crisis triggers a broader financial shock.
While some investors took profits after gold's near 4 percent rise last week, traders said gold could still outperform the equities market on safe-haven bids due to a worsening of Europe's debt crisis.
"While stocks may be nearing an attractive entry point, precious metals may be rising on investors' shopping lists as they start to look at deploying cash positions," said Jeff Kleintop, chief market strategist of broker-dealer LPL Financial.
On platinum group metals, spot platinum was up 1.8 percent at $1,454.80 an ounce, while spot palladium edged up 0.4 percent at $622.03 an ounce.