Fed Taper Drives Gold Below $1,200

Gold dropped below $1,200 an ounce to a five-month low as the Federal Reserve trimmed economic stimulus, reducing demand for a store of value. Silver tumbled.

The Fed will cut monthly asset purchases to $75 billion from $85 billion, “reflecting cumulative progress and an improved outlook for the job market,” Chairman Ben S. Bernanke said yesterday after officials concluded a two-day meeting. Gold rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system.

Gold futures for February delivery fell 3 percent to $1,197.50 an ounce at 10:49 a.m. on the Comex in New York after dropping to $1,192, the lowest since June 28. Prices tumbled into a bear market in April and are heading for the first annual decline in 13 years, as investors lost faith in the metal. Through yesterday, futures plunged 36 percent since reaching a record $1,923.70 in September 2011.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza