Gold futures gained in electronic trading on Wednesday afternoon in New York, after ending lower at the close of trade when the Federal Reserve announced its decision to keep interest rates steady as inflation concerns rise.

Gold for August delivery was last at $886.30 an ounce on Globex as of 2:30 p.m. EDT.

Gold futures for August delivery fell $9.30, or 1 percent, to $882.30 an ounce on the Comex division of the New York Mercantile Exchange, as a decline in energy costs lowered the investment appeal of the precious metal as a hedge against inflation.

Fed Chairman Ben Bernanke and his colleagues concluded after their two-day meeting to avoid a yet another contraction, ending the most aggressive series of rate cuts in two decades.

Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,'' the Federal Open Market Committee said in a statement today in Washington.

The hold was expected, after several speeches by Fed officials highlighted the concern that inflation was creating for policy makers. It was the first time in 10 months that the central bank did not cut rates-last summer; the key rate was above 5 percent.

Crude oil dropped as much as 3.7 percent to $131.95 a barrel today after a government report showed an unexpected increase in U.S. inventories.

The dollar index, which measures the U.S. unit against a basket of major currencies, was at 73.01, compared to 73.22 late Tuesday.

A weaker U.S. currency boosts the price of dollar-denominated assets, such as crude oil and gold, as it makes them more expensive for holders of other currencies.

Silver futures for September delivery declined 13.2 cents, or 0.8 percent, to $16.607 an ounce. July platinum fell $11.50 to close at $2,013.50 an ounce and September palladium shed $6.95 to finish at $465 an ounce. September copper fell 1.4 cents to close at $3.773 a pound.