By Tatyana Shumsky 

Gold prices spiked higher Wednesday after the Federal Reserve sowed doubts about a potential interest-rate increase in September, citing stubbornly low inflation as a concern.

The Federal Open Market Committee, the central bank's policy-setting arm, said it remains on course to raise interest rates but flagged low inflation as a point of concern among officials that could prompt them to delay. Inflation has continued to run below the Fed's 2% target, and officials said they were monitoring developments closely--a sign of alarm. Still, solid gains in employment and moderate growth in the overall economy place the U.S. central bank on track to tighten policy soon. Fed officials have three scheduled policy meetings left this year, with September being the next one.

"The statement was pretty dovish, and there was no dissent in the announcement," said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.

Gold prices had been posting losses ahead of the Fed's policy statements, but rallied to $1,100.90 a troy ounce in response in aftermarket trading. Yet, just as quickly, gold gave up the gains.

"The fact that the rally in metals wasn't sustained shows you how cautious traders are in with the precious metals market," Mr. Haberkorn said.

Gold prices have been plumbing five-year lows as investors prepared for the Federal Reserve to raise interest rates for the first time in nearly a decade by selling their gold holdings. The U.S. economic recovery is gathering momentum, with gains in employment, manufacturing and home construction powering the rebound. Many investors believe this puts the Fed closer to removing the emergency measures enacted in the wake of the 2008 financial crisis. This is bad news for gold, which doesn't pay an income, costs money to hold and would struggle to compete with yield-bearing assets once rates climb.

"The fact that there's still a rate increase possible is going to pressure this market for the remainder of the year," Mr. Haberkorn said.

The most actively traded gold contract, for August delivery, settled down $3.60, or 0.3%, at $1,092.60 a troy ounce on the Comex division of the New York Mercantile Exchange. Gold settled at 1.30 p.m. ET, roughly half an hour before the FOMC released its policy statement.

Write to Tatyana Shumsky at tatyana.shumsky@wsj.com