Gold Drops Below $1,200 after FOMC

Gold fell below $1,200 an ounce as a government report showed that the U.S. economy expanded more than forecast, damping demand for the metal as an alternative investment. Silver tumbled to a 55-month low.

Gross domestic product grew at a 3.5 percent annualized rate in the third quarter, compared with a median forecast for a 3 percent advance by economists in a Bloomberg survey, data showed today. Gold fell to a three-week low, a day after the Federal Reserve announced an end to monthly debt purchases to bolster the economy.

Global holdings in exchange-traded products backed by gold have dropped to the lowest in five years. On Oct. 6, gold touched $1,183.30, the lowest this year. Fewer Americans filed applications for unemployment benefits over the past month than at any time in 14 years, government figures showed today.

“Gold dipped further on the stronger-than-expected GDP print and weekly claims” for jobless benefits, Tai Wong, the director of commodity product trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The market was already under pressure as the Fed ended the QE, and there are no worries about inflation.”

Gold futures for December delivery fell 1.9 percent to $1,202 at 10:39 a.m. on the Comex in New York. Earlier, the price touched $1,199.30, the lowest for a most-active contract since Oct. 6. Aggregate trading was 52 percent above the average for the past 100 days for this time, according to data compiled by Bloomberg.

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