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Thursday, July 31, 2014

Gold drops for second straight day

Strong GDP report and strong US dollar pressure prices 


Bullion prices once again mixed on Wednesday, 30 July 2014 at Comex. Gold prices continued to pull back on Wednesday as a stronger-than-expected report on the U.S. economy dampened demand for safety plays. Prices were pressured somewhat by a much-stronger-than-expected U.S. gross domestic product report and by a rising U.S. dollar index that hit a nearly six-month high. 

Gold for August delivery fell for a second day, dropping $3.40, or 0.3%, to settle at $1,294.90 an ounce. 

September silver edged up a penny to $20.60 an ounce. 

The U.S. economy expanded at a 4% annual pace in the second quarter, stronger than economists had forecast and a sign that the economy has recovered from the unusually harsh winter. 3.0% rise was expected versus a reading of minus 2.9% in the first quarter. The GDP report mildly pressured the gold market and U.S. Treasuries, while boosting modestly the U.S. stock indexes and the U.S. dollar index. 

Wednesday afternoon's results of the two-day meeting of the Federal Reserve's Open Market Committee (FOMC) were as expected. The FOMC will continue to taper its monthly bond-buying program (quantitative easing) by slicing another $10 billion per month from the program—now totaling $25 billion a month. Traders and investors did not expect a lot of fresh, significant news to come out of the FOMC meeting, which was the case as market reacted little to the news. 

The ADP national employment report for July was also out earlier on Wednesday. That report is a precursor to Friday's more important Labor Department employment report. The ADP figure was forecast to come in at up 238,000, but was a slight miss on the downside and reported at up 218,000. Friday's U.S. jobs report is forecast to see a rise in non-farm payrolls of 230,000 in July versus up 288,000 in June. 

In overnight news, the European Union reported its business confidence index, called the Economic Sentiment Indicator, rose to 102.2 in July from 102.1 in June. The July figure beat market expectations for a reading of 101.9. 

There are geopolitical issues impacting trading this week. The European Union and U.S. this week have slapped new and harsher sanctions on Russia. However, those sanctions did not surprise the market place and there was a muted reaction from markets on Wednesday.
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