Gold prices fall back below the key $1,200.00 level
Bullion prices ended lower on Tuesday, 16 December 2014 at Comex. Gold prices lost ground Tuesday, erasing early gains that followed worldwide turbulence briefly triggered by hand-wringing over Russia's rapidly tumbling ruble. Prices fell back below the key $1,200.00 level, in a volatile day that saw prices trade both sides of unchanged. Safe-haven demand early in the session gave way to selling pressure on ideas upcoming FOMC data will favor the U.S. monetary policy hawks.
Gold for February delivery settled down $13.40, or 1.1%, at $1,194.30 an ounce. The contract jumped above $1,220 early Tuesday as U.S. stocks slumped, but it then turned negative while equities pared their early losses.
March silver dived by 81 cents, or 4.9%, to settle at $15.75 an ounce.
As the U.S. trading day got under way, it was a keen “risk-off” scenario in the world market place on Tuesday. U.S. stock indexes and world stock markets were lower after posting moderate gains overnight. However, as the U.S. session progressed U.S. stocks rebounded well off their daily lows, but in choppy fashion. The fact the U.S. stock indexes posted solid rebounds from their daily lows also put downside price pressure on gold and silver.
There were several worrisome developments today but the main concern is the Russian ruble plunged around 15% in value and hit another record low versus the U.S. dollar—despite the Russian central bank on Tuesday implementing an emergency interest rate increase from 10.5%, to 17%.
Crude oil prices overnight sunk to a five year low of $53.60 a barrel, basis January Nymex futures today. In stunning fashion, crude oil prices have lost half of their value since June. That's a very rare feat in any commodity market.
Surprisingly, the U.S. dollar index was under strong selling pressure today. The greenback did not benefit from any safe-haven flows amid the markets turmoil.
In other dour overnight news, China reported its HSBC purchasing managers' index (PMI) fell to a seven-month low of 49.5 in December from 50.0 in November. A reading below 50.0 suggests contraction in the sector. Meantime, the Markit data firm reported the European Union composite PMI came in at 51.7 in December from 51.1 in November. However, in Germany, the EU's largest economy, the composite PMI fell to 51.4 in December versus 71.7 in November.
Traders and investors were also looking to Tuesdays' start of the Federal Reserve Open Market Committee (FOMC) meeting to discuss U.S. monetary policy. Many believe the Fed meeting will slightly change statement wording to favor the monetary policy hawks. The FOMC could also further elaborate on a timeline for raising interest rates. The Fed has not raised interest rates in six years.
