The more the U.S. economy improves, the worse things get for gold. Bullion fell below $1,200 an ounce today, erasing its gains for the year, after the government reported that the U.S. grew at a faster pace than analysts forecast in the third quarter. A stronger economy is validating optimism that prompted the Federal Reserve to say yesterday that it will stop buying debt, further diminishing the appeal of precious metals an inflation hedge. Silver tumbled to a 55-month low.
Global holdings in exchange-traded products backed by gold have dropped to the lowest in five years. In China, the world’s top bullion buyer, the government sent investigators to probe a sevenfold surge in precious-metals exports, raising concern demand in the country will slide. Imports in India, the second-biggest consumer, are poised to plunge this month, a jewelers’ group said.
“In the current environment, we see no reason to own gold,” Scott Gardner, who helps manage $450 million at Verdmont Capital SA in Panama City, said in a telephone interview. “Some people were disappointed with yesterday’s Fed statement since they expected it to be more dovish in light of a stronger dollar, and we continue to see some good U.S. economic data.”
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