Gold drops as U.S. GDP report surprises and sparks dollar rally
Published Nov 07, 2013 02:24PM ET
Gold and the dollar trade inversely with one another.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,307.20 during U.S. afternoon hours, down 0.80%.
Gold prices hit a session low of USD1,296.90 a troy ounce and high of USD1,325.70 a troy ounce.
Gold futures were likely to find support at USD1,251.10 a troy ounce, the low from Oct. 15, and resistance at USD1,361.70, the high from Oct. 28.
The December contract settled up 0.74% at USD1,317.80 a troy ounce on Wednesday.
Official data released earlier showed that the U.S. economy grew at an annual rate of 2.8% in the three months to September, far surpassing expectations for a 2.0% reading. The U.S. economy grew by 2.5% in the preceding quarter.
The robust data rekindled expectations that the Federal Reserve could announce plans to scale back its USD85 billion-a-month stimulus program as its next monthly meeting in December.
Stimulus programs drive recovery by depressing borrowing costs, weakening the dollar in the process, and talk of their dismantling strengthens the currency and tarnishes gold's reputation as a hedge.
Separately, the Department of Labor said the number of individuals filing for initial jobless benefits in the U.S. last week fell by 9,000 to a seasonally adjusted 336,000, largely in line with analysts' forecasts for a claims to fall by 10,000.
The dollar saw added demand after the European Central Bank trimmed its benchmark interest rate to a record-low 0.25% from 0.5% in an unexpected decision that punished the euro and bolstered the dollar's safe-haven appeal.
The bank also cut its marginal lending rate to 0.75% from 1% and left its deposit facility rate unchanged at zero.
ECB President Mario Draghi said euro zone borrowing costs will remain at present or even lower levels until the economy improves, adding that the euro zone may experience "a prolonged period of low inflation."
Elsewhere on the Comex, silver for December delivery was down 0.82% at USD21.590 a troy ounce, while copper for December delivery was up 0.06% and trading at USD3.239 a pound.
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Written By: Investing.com
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