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Friday, October 31, 2014

Big loss for bullions

Prices hit hard by a stronger U.S. dollar and a surprisingly hawkish Federal Reserve 


It was a dull day for precious metals on Thursday, 31 October 2014 at Comex. Gold prices ended the U.S. day session sharply lower and hit a three-week low on Thursday. Precious metals have been hit hard by a stronger U.S. dollar and a surprisingly hawkish Federal Reserve. Silver prices slumped to a four-year low on Thursday. Prices slipped after the Federal Reserve pulled the plug on its stimulus program and showed confidence that the U.S. economic recovery is on track. 

Gold for December delivery skidded $26.30, or 2.2%, to settle at $1,198.60 an ounce.
December silver dropped 84 cents, or 4.9%, to $16.42 an ounce. 

A day earlier, the anticipation of the Fed's farewell to QE3 did little to inspire gold buying. Gold prices had settled before the Fed announcement. he precious metals were still feeling the ill effects of a hawkish FOMC statement issued Wednesday afternoon. The FOMC statement was deemed surprisingly hawkish on U.S. monetary policy. The Fed ended its monthly bond-buying program (quantitative easing), which was expected. However, the FOMC statement emphasized the improving U.S. economy, which led many to believe U.S. interest rates will be raised in 2015. The majority of traders and investors were looking for a dovish lean from the FOMC statement. 

Relatively robust economic data pressured the precious metal further and pushed up stock prices. The U.S. economy grew 3.5% in the third quarter, bolstered by a surge in exports and federal spending. The report further undermined the safe-have gold market. 

The U.S. dollar index has posted a solid rally in the wake of the FOMC meeting and hit a three-week high on Thursday. The greenback is hovering near a four-year high. Meantime, Euro currency prices slumped on the FOMC statement. 

In overnight news, the Euro zone got another downbeat economic report on Thursday. EU consumer confidence came in at a reading of minus 11.1 in October from minus 11.4 in September. The report met market expectations but is another reminder of the ill economic health of the European Union, which is the world's third-largest economy. 
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