Gold tumbled below $1,200 per ounce on Thursday while silver plunged 4%, the lowest since March 2010, only a day after the US Federal Reserve gave upbeat comments on economic growth and ended its bond-buying stimulus program.
The dollar index was lifted by the unexpectedly high Q3 US economic growth data on Thursday and the Fed policy statement that suggested the US central bank might raise interest rates sooner than expected, as reported by Reuters.
According to analysts, the sooner-than-expected rise in interest rates and a dollar rally might weight on the gold prices more.
Deutsche Bank head of commodity, Michael Lewis said, “The feeling was that given the turmoil markets had seen earlier in the month, maybe the Fed might have been a little more dovish. But what the Fed said was that that hadn’t changed its outlook.”
He added, “Our sense is that there are still obviously more adjustments still to come in terms of higher real rates and the dollar, and we do feel that gold will be breaking those lows.”
Spot gold dropped as low as $1,195.70 per ounce and dropped 1.2% at $1,197.40 per ounce at 3:16 p.m. (1916 GMT). December futures dropped $27.90 to $1,197.
According to CNBC, silver dropped 3.2% at $16.50 per ounce, after hitting the lowest from March 2010 at $16.45.
The central bank dismissed the financial market volatility, a weak inflation outlook and a slowdown in Europe as factors that could limit the progress towards its inflation and unemployment goals.
Data from the Commerce Department showed a smaller trade deficit and the buoying of the US growth in Q3 by a surge in defense spending.
UBS said, “Overwhelming bearish pressures weigh on the metal, with both technical can fundamental indicators pointing lower. That could take the price towards significant support at 1183.23, the October low, which also coincides with the December 2013 low.”
Spot platinum dropped 1.5% to $1,235.25 per ounce while spot palladium dropped 1.9% to $774.75 per ounce.
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