Gold Drops After Fed Taper and USD Positive Data

Gold fell 1% in thin trade on Thursday, a day after the 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 0.8% at $1,282.41 an ounce at 09.43am GMT, having earlier touched a low of $1,277.78 an ounce, while US gold futures for June delivery were down $12.80 an ounce at $1,283.10.

Prices fell despite Wednesday’s soft reading of first-quarter US growth, which showed the severe winter hampered exports and led businesses to curtail investment spending.

via BDLive

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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