Other futures rose broadly, with crude oil, copper and agriculture futures all trading higher.
The Federal Reserve slashed a key interest rate by three-fourths of a percentage point in a bid to free up locked credit markets and kick-start the U.S. economy. The move lowered the federal funds rate to 2.25 percent, the lowest level since in more than three years. Still, many investors had predicted a full point cut.
Gold for April delivery rose $1.70 to settle at $1,004.30 on the New York Mercantile Exchange but pulled back nearly $25 after the Fed's decision. The metal fetched $978.20 an ounce in aftermarket trading, down $24.40.
Gold investors are "taking some money off the table," George Gero, vice president of RBC Capital Markets Global Futures in New York, said in a note. "But with the energy rally and weaker dollar, we have to assume setbacks in gold are still buying opportunities at the moment."
Though some analysts warn gold is due for a correction, others say it could still move higher first due to economic worries, record high crude prices and a tumbling dollar. Gold is traditionally viewed as safe-haven investment during times of economic uncertainty and rising inflation.
The dollar strengthened slightly after the Fed's move, further prompting investors to sell gold. The euro traded at $1.5640 in Tuesday afternoon trading, down from a record-high reached earlier in the day of $1.5831.
The greenback's decline versus the 15-nation euro has been a major driver of gold, which gained 31 percent last year and 18 percent so far this year. A falling dollar encourages buying of gold because the metal is known for holding its value. A weaker greenback also makes dollar-denominated commodities like gold cheaper for overseas buyers.
Other precious metals traded mixed Tuesday. Silver for May delivery fell 34 cents to settle at $19.96 an ounce on the Nymex, while May copper added 6.15 cents to settle at $3.7465 a pound.
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