Tags: Gold | Price | Fed | Inflation

Gold Prices Slide on Fed's Low-Inflation Outlook

Wednesday, 29 Oct 2014 05:49 PM

Gold prices fell the most in three weeks Wednesday as the Federal Reserve ended its bond-purchase program, cutting demand for the metal as hedge against inflation.

The Fed maintained its pledge to keep interest rates near zero percent for a “considerable time,” while citing improvements for the American labor market as it ended its asset buying at the conclusion of its two-day policy meeting.

“People will not see the need for gold in an environment of low inflation and solid job growth,” Chris Gaffney, the senior market strategist at EverBank Wealth Management in St. Louis, said in a telephone interview. “While it was expected, the ending of the asset-purchase program added to the negative sentiment.”

Bullion fell to this year’s low on Oct. 6 amid waning demand for a store of value. Holdings in global exchange-traded products backed by gold are at the lowest in five years, and measures of volatility for the metal have pared recent gains. The U.S. economy isn’t in danger of a major pullback even as Europe languishes and China’s growth slows, Treasury Secretary Jacob J. Lew said today.

Gold for immediate delivery dropped 1.4 percent to $1,211.68 an ounce at 3:49 p.m. New York time, heading for the biggest drop since Oct. 3. Prices touched $1,208.50, the lowest since Oct. 8.

Bullion climbed 70 percent from December 2008 to June 2011 as the U.S. central bank bought debt and held borrowing costs near zero percent in a bid to shore up growth. Prices slumped 28 percent last year partly because the gains for consumer prices investors were concerned about after the increase in money supply failed to materialize.

Low Inflation

While Fed policy makers said that inflation in the near term will probably be held down by lower energy prices, they repeated language from a September statement that “the likelihood of inflation running persistently below 2 percent has diminished somewhat.”

Inflation expectations, measured by the five-year Treasury break-even rate, this month reached the lowest since October 2011.

Gold prices will drop to $1,050 over the next 12 months as the U.S. economy accelerates, Goldman Sachs Group Inc. has said.

On the Comex in New York, gold futures for December delivery settled 0.4 percent lower at $1,224.90 before the release of the Fed statement.

Silver futures for delivery in December added 0.2 percent to $17.264 an ounce on the Comex.

On the New York Mercantile Exchange, palladium futures for delivery in December advanced 0.9 percent to $800.70 an ounce. Prices rose for a ninth straight sessions, the longest rally since Aug. 18. Platinum futures for January delivery gained 0.2 percent to $1,269.20 an ounce.

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Gold prices fell the most in three weeks Wednesday as the Federal Reserve ended its bond-purchase program, cutting demand for the metal as hedge against inflation.
Gold, Price, Fed, Inflation
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2014-49-29
Wednesday, 29 Oct 2014 05:49 PM
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