Gold rose on Wednesday, extending gains after the U.S. Federal Reserve announced plans to trim its aggressive bond-buying program, but sought to temper the long-awaited move by suggesting its key interest rate would stay lower for even longer than previously promised.

In what amounts to the beginning of the end of its unprecedented support for the U.S. economy, the central bank said it would reduce its monthly asset purchases by $10 billion, bringing them down to $75 billion. 

But in a move likely meant to forestall any sharp market reaction that could undercut the recovery, the central bank also said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the jobless rate falls below 6.5 percent.

Gold prices initially fell in a knee-jerk response, but it quickly rebounded, tracking the equity market, while the dollar fell against the euro."

"The reason gold is doing well because the Fed is all but promising to be behind the curve in raising interest rates when inflation does pick up," said Axel Merk, portfolio manager of California-based Merk Funds, which has about $450 million worth of assets under management.

Spot gold was up 0.5 percent at $1,236.10 an ounce by 2:47 PM EST (1947 GMT). U.S. gold futures for February delivery settled up $4.90 an ounce at $1,235.

Trading volume was about 20 percent below its 30-day average, preliminary Reuters data showed.