Gold Plunges On Strong Dollar, Fed Minutes

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Gold futures settled sharply lower Wednesday, as the dollar strengthened after the Federal Open Market Committee policy meet minutes showed views divided over the duration of bond purchases. Gold was also impacted after Goldman Sachs cut its price forecast for the precious metal for 2013 and 2014.
Gold also came under pressure after an early release of the FOMC meet minutes. Some members of the Federal Reserve’s rate setting board opined the central bank could be going too far in support of the U.S. economy, the minutes of the policy meet showed Wednesday morning. Nevertheless, the Fed at the end of its two-day meet has decided to continue buying mortgage-backed securities at a pace of $40 billion per month and purchases of longer-term Treasury securities at a pace of $45 billion per month. The Fed’s benchmark interest rate will continue at near zero.
Meanwhile, Goldman Sachs trimmed its gold price forecast, on expectations U.S. economic growth would accelerate. Goldman Sachs lowered its 2013 average gold price forecast to $1,545 an ounce from $1,610 and its 2014 price forecast to $1,350 an ounce from $1,490. Gold for June delivery, the most actively traded contract, plummeted $27.90 or 1.8 percent to close at $1,558.80 an ounce Wednesday on the Comex division of the New York Mercantile Exchange.
Gold for June delivery scaled an intraday high of $1,588.50 and a low of $1,556.40 an ounce.
Yesterday, gold rose nearly 1 percent mostly on bargain hunting as the dollar weakened after an unexpected drop in U.S. wholesale inventories reading. Gold prices also found support in the lower than expected Chinese inflation data with little prospect of any stringent monetary policy there in the near term.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 82.51 on Wednesday, up from 82.40 late Tuesday in North American trade. The dollar scaled a high of 82.54 intraday and a low of 82.23. The euro traded lower against the dollar at $1.3061 on Wednesday, as compared to $1.3082 late Tuesday in North America. The euro scaled a high of $1.3121 intraday and a low of $1.3054.
In economic news from the eurozone, French industrial production recovered at a faster than expected pace in February, the statistical office Insee said. Industrial output gained 0.7 percent in February from a month ago, when it fell 0.8 percent. It was forecast to grow just 0.2 percent. At the same time, manufacturing output grew 0.8 percent, offsetting the 1.3 percent drop seen in January. Construction output advanced 1 percent.
Elsewhere, China unexpectedly reported a trade deficit for March amid a surge in imports and a weaker expansion in exports, official data showed Wednesday. Separately, Fitch Ratings downgraded the country’s local currency sovereign rating on Tuesday, citing surging credit growth in the country. The General Administration of Customs said that the trade balance turned to a deficit of $884 million in March, belying expectations for a surplus of $15.15 billion. In February, the balance was in a surplus of $15.23 billion.

Source: RTT Staff Writer
Source: Bullion Bulletin

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