Gold fell for a second day on Thursday and remained near yesterdays 4-1/2-month low as the U.S. dollar advanced after FOMCs October meeting protocols revealed policy makers might scale back Feds monthly bond purchases in the coming months if the deceleration was warranted by sustainable economic growth. Silver fell, while platinum and palladium posted minor advances.
On the Comex division of the New York Mercantile Exchange, gold futures for settlement in December fell by 0.86% to $1 247.20 per troy ounce by 9:59 GMT. Prices shifted in a days range between $1 248.90 and $1 241.70 an ounce, near Wednesdays 4-1/2-month low of $1 240.30 an ounce. The precious metal plunged by more than 2.2% yesterday, the most in more than a month, and extended its weekly decline to nearly 3.3% on Thursday.
Gold retreated as the U.S. dollar regained its recently lost positions after minutes of FOMCs October meeting revealed the Federal Reserve might begin trimming its quantitative easing program “in the coming months”, if the economic recovery moves in the desired direction. Yesterday’s Fed minutes showed that policy makers “generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.”
Jordan Eliseo, chief economist at Sydney-based ABC Bullion, commented for Bloomberg: “The tone is definitely bearish but it is a day-to-day proposition. If we see a really bad economic data point come out, or something that is considered to lessen the likelihood of the Fed to taper then that would support gold prices.”
The U.S. dollar index, which measures the greenbacks performance against a basket of six major counterparts, traded at 81.21 at 9:58 GMT, up 0.10% on the day. Prices varied in a range between a one-week high of 81.33 and days low of 81.05. The December contract jumped to positive weekly territory on Wednesday by rising by nearly 0.5% and extended its advance for the week to over 0.4% on Thursday. Strengthening of the U.S. currency makes dollar-denominated raw materials more expensive for foreign currency holders and limits their appeal as an alternative investment.
The U.S. dollar was pressured earlier in the week following comments by Fed Vice-Chairwoman Janet Yellen supporting Feds current bond purchasing program and a statement by Ben Bernanke. The greenback drew support and pressured gold on Wednesday after the U.S. Commerce Department reported that retail sales rose by 0.4% last month, exceeding the median estimate of 86 analysts surveyed by Bloomberg for a minor 0.1% advance. September’s reading received and upward revision to 0.0% after being initially estimated at -0.1%.
Meanwhile, core retail sales, which exclude the volatile automobile market, jumped by 0.2% last month after September’s reading was revised down to 0.3% from initially calculated at 0.4%. Core retail sales correspond closely with the consumer spending component of gross domestic product (GDP). Their jump was largely based on increased demand for clothing, electronics, furniture and sporting goods.
Data however also showed that sales of previously-owned homes in the U.S. dropped by 3.2% last month to 5.12 million from 5.29 million in September, the fewest sold in since June.
Gold was further pressured after the Labor Department said that U.S. consumer inflation generally met analysts’ expectations and remained well below Fed’s official target of 2%, limiting demand for the precious metal as a hedge against rising prices.
The consumer price index (CPI) dropped by 0.1% in October as prices of energy, new cars and clothing fell, confounding expectations for a 0.1% increase and underperoforming the preceding month’s 0.2% jump. Year-on-year, consumer inflation matched projections and rose by 1.0%, the slowest advance since October 2009, trailing September’s 1.2% gain.
Core consumer prices, which exclude the more volatile food and energy costs, met expectations and inched up by 0.1% in October, gaining by the same margin for a third straight month. Year-on-year, core consumer inflation surged by 1.7%, matching both anticipations and September’s 1.7% advance.
Assets in the SPDR Gold Trust, the biggest bullion-backed ETF, fell to 860.31 tons on November 20, data on its web site showed. This was a third consecutive daily decline and the lowest level since February 2009.
This comes after Federal Reserve Chairman Ben Bernanke said on Tuesday the central bank will maintain its aggressive monetary policy for as long as needed and will commence scaling back its bond purchases once it is assured the labor market recovery is robust, indicating dependence on currently released key data points from the U.S. He said that a “preponderance of data” would be needed to begin removing accommodation.
According to the latest survey of analysts conducted by Bloomberg on November 19, 80% of investors expected the Federal Reserve to delay trimming its monetary easing program until March next year, while 5% predicted a move in December.