Gold News

Gold Ends Weds 1.7% Lower as US Stocks Surge on Fed Rate-Cut Hopes & Crude Oil Plunge

From Chris Mullen at GoldSeek...

Gold Prices
fell in Asia on Wednesday and dropped as low as $791.25 for a $20 loss by early trade in London.

The Gold Market then rebounded in early New York trade to $807.65 but then fell back off into the close and ended with a loss of 1.67%.

Silver dropped to as low as $14.11 before it rallied to find a decent gain at as high as $14.547, but it also fell back off into the close and ended with a loss of 0.90%.

Gold Priced in Euros
fell to about €542, platinum lost $7 to $1436, palladium lost $7 to $344, and copper rose roughly 5 cents to about $3.03.

Gold and silver mining equities remained mixed and near unchanged in morning trade, but they then surged higher in afternoon trade along with the major indices and ended with nearly 3% gains.

Data showed Existing US Home Sales falling a whopping 20.7% last month compared to Oct. 2006 and the median home price dropped 5.1% as inventories rose to a 10.8 month supply.

US Fed vice-chairman Donald Kohn started the day off with comments that greatly increased hopes for an interest rate cut at their next meeting and the Fed’s Beige Book confirmed that sentiment later in the day.

Treasuries fell and interest rates rose in the open market despite that more dovish Fed outlook. That outlook sent the Dow, Nasdaq, and S&P substantially higher and pulled money out of bonds and into stocks. The Dow rallied for two straight days for the first time in a month.

The Fed’s Fisher then came out with some comments about how he is very concerned about inflation, but those went largely ignored as crude oil prices fell about 4% to a two-week low despite reports that Saudi Arabia foiled a terrorist attack and arrested over 200 al-Qaeda linked suspects that are accused of a number of plots including attacks on oil installations. All ears now turn to Bernanke’s comments later today.

The US Dollar index rose slightly, but it ended far from its early highs as an overnight short covering rally was cut into by the prospect of an interest rate cut of at least 25 basis points at the Fed’s next meeting on December 11th.

The fall in crude oil prices came as US inventories did not fall as much as expected and indicated that demand may be finally dropping off due to a slowing economy.

Crude stockpiles fell just 400,000 barrels, gasoline inventories built 1.4 million barrels, distillates fell 100,000 barrels, and refinery utilization rose 2.4% to 89.4%.

Also today come Initial Jobless Claims data for 11/24, plus 3rd quarter GDP expected at 4.0%, and the Chain Deflator expected at 0.8%. At 14:00 GMT are New Home Sales for October.

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Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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