Gold fell around one percent in thin trade on Thursday, a day after the US Federal Reserve announced a further cut in its stimulus programme and reiterated its confidence in the US economic outlook despite weak first-quarter growth.

Outflows resumed from bullion-backed exchange-traded funds, suggesting investor confidence in the metal remains soft.

Optimism over the health of the US economy suggests the Fed will keep paring back its monetary easing programme, relieving downward pressure on long-term interest rates and taking the heat out of inflation fears. Gold is seen as a hedge against inflation risk.

Spot gold was down 0.9 percent at $1,279.24 an ounce at 1351 GMT, having earlier touched a low of $1,277.78 an ounce, while US gold futures for June delivery were down $16.80 an ounce at $1,279.20.

"We are now testing the recent lows after the Fed tapering and as volumes are low due to the holiday in most European countries and a test of the $1,275 mark could be crucial," Societe Generale analyst Robin Bhar said.

The dollar steadied on Thursday after dropping sharply in the previous session following the weak growth data.

In the latest economic reports, jobless claims unexpectedly rose in the latest week, though the underlying trend continued to point to improving labour market conditions. Separately, US consumer spending recorded its largest increase in more than four and a half years in March. - Reuters