Positive U.S. economic outlook rings bad news for gold
Spot gold price continued to track losses after Wednesday’s FOMC statement and positive GDP data out of the US on Thursday. The recent more optimistic outlook for the US economy is driving dollar strength and putting pressure on the precious metals as investors put up better risk appetite and stay away from the traditional safe-haven commodity.
On Thursday, data showed US GDP grew at a 3.5-percent pace in the third quarter, beating the 3.1-percent forecast and in line with recent optimistic assessment of the US economy by the Federal Reserve.
On Wednesday, The Fed announced the end of its monthly bond buying program and said that if “incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated”.
“Consequently, the acknowledgement by the FOMC that inflation is likely to remain low in the near term, paired with a stronger USD after the FOMC statement, pressured gold…While the backdrop appears negative for gold, a break below $1,200 per ounce would likely stimulate physical demand, most notably from the emerging markets, we believe. Modest physical buying was already evident during the recent slide,” said HSBC Securities analyst James Steel.
Gold price traded today below the key $1,200 psychological level at the current $1,198.4. It slid one percent on Thursday to end the day at $1,200. The current price is the lowest in a month where the metal last hit a low of $1,183.20 on October 6.
Silver joined in sliding wagon, free-falling to hit below $17 per ounce on Thursday. The metal slumped more than three percent to end Thursday at $16.51 while current trade see prices at $16.36 per ounce.
As with gold, the price slide had prompt attention from physical buyers who are taking to the industrial metal as a cheaper exposure to gold – GoldMoney’s Dealing Manager, Kelly-Ann Kearsey said the online bullion dealers’ customers were more upbeat about the industrial metal, “Whilst we’ve see net gold selling among our customers, we have concurrently seen net buying of silver. It’s not been everyone’s preference as on the main markets it’s lost fairly heavily, but it’s certainly caught the attention of some of our customers and kept silver’s trading with us in the positive.”
The PGMs have fallen in tandem with gold as well, with platinum dropping a percent on Thursday to end at $1,245 and current prices are now sitting at $1,239 per ounce. Palladium is lower as well, last trading at $777, a drop of $8 from yesterday’s $785.