Gold
prices Thursday (NYSE: GLD)
continue to fall following U.S. Federal Reserve Chairwoman Janet
Yellen’s first-ever Federal Open Market Committee (FOMC) meeting, hitting
a three-week low in early trading. The yellow metal’s decreases over the last
few sessions have obliterated all of March’s gains, including a six-month
high achieved on March 17.
Spot
gold dropped as low as $1,320.24 an ounce, its lowest since Feb. 28; as
recently as Monday, the metal was flirting with $1,400 an ounce. U.S. gold
futures for April delivery fell to $15.30 an ounce at $1,326.00. Bullion for
immediate delivery declined 0.5% to $1,323.18 in London.
The
FOMC elected to trim its asset-purchasing program (quantitative easing) by
another $10 billion to $55 billion per month and said it will slow purchases in
“further measured steps.”
But
the bigger story affecting gold prices was the FOMC’s decision to alter
language on when the Fed would start to consider an increase in interest rates
once U.S. employment reaches 6.5%. The new language provides the central
bank greater discretion in the timeline for when a rate increase occurs,
regardless of the national unemployment rate, which sits today at 6.7%.
Record-low
interest rates over the last few years have been fueling gold, as they cut the
opportunity cost of holding non-yielding bullion over other assets. Gold
climbed 70% from 2008 to 2011 as the Fed pumped more than $2 trillion in
stimulus money into U.S. financial markets, slashing interest rates to drive
the economy.
On
yesterday’s news that U.S. interest rates could rise sooner than expected, gold
promptly took its biggest one-day fall since January, dropping 1.8%.
“Gold
was already on the defensive as safe haven bets were closed, and the Fed news
added some additional pressure,” Saxo Bank’s head of commodities research
Ole Hansen said to Reuters.
“The market is now busy pricing in higher rates sooner than previously
expected, and that could become poisonous for gold.”
Gold
prices today are also falling as the Fed’s domestic news pushed the
Ukraine-Russia conflict off the radar for the time being.
Gold,
a safe-haven investment, had been moved higher and higher as tensions between
Russia and the West increased throughout March.
“The
risk related to Ukraine has not gone away, but moved to the sidelines for the
time being,” Hansen said.
http://moneymorning.com/2014/03/20/gold-prices-today-three-week-lows-fomc-meeting/
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