Silver Slumps to 55-Month Low

Gold fell below $1,200 an ounce as a government report showed that the U.S. economy expanded more than forecast, damping demand for the metal as an alternative investment. Silver tumbled to a 55-month low.

Gross domestic product grew at a 3.5 percent annualized rate in the third quarter, compared with a median forecast for a 3 percent advance by economists in a Bloomberg survey, data showed today. Gold fell to a three-week low, a day after the Federal Reserve announced an end to monthly debt purchases to bolster the economy.

Global holdings in exchange-traded products backed by gold have dropped to the lowest in five years. On Oct. 6, gold touched $1,183.30, the lowest this year. Fewer Americans filed applications for unemployment benefits over the past month than at any time in 14 years, government figures showed today.

“Gold dipped further on the stronger-than-expected GDP print and weekly claims” for jobless benefits, Tai Wong, the director of commodity product trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “The market was already under pressure as the Fed ended the QE, and there are no worries about inflation.”

Gold futures for December delivery fell 1.9 percent to $1,202 at 10:39 a.m. on the Comex in New York. Earlier, the price touched $1,199.30, the lowest for a most-active contract since Oct. 6. Aggregate trading was 52 percent above the average for the past 100 days for this time, according to data compiled by Bloomberg.
‘Solid Gains’

“Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate,” the Federal Open Market Committee said yesterday.

Silver futures for delivery in December plunged 4.3 percent to $16.515 an ounce. A close at that price would mark the biggest drop since Dec. 19. The metal touched $16.455, the lowest since March 2, 2010. Trading was 79 percent above the average for the past 100 days for this time, according to Bloomberg data.

Last quarter, gold slumped 8.4 percent as the dollar jumped 6.7 percent and equities surged to an all-time high. Yesterday at the conclusion of its two-day policy meeting. the Fed maintained its pledge to keep interest rates near zero percent for a “considerable time.”

Rising rates reduce gold’s allure because the metal generally offers investors returns only through price gains, while a stronger dollar typically cuts demand for a store of value.

The Fed statement was “more hawkish than what the market was expecting,” Edward Meir, an analyst at INTL FCStone Inc., wrote in a note. “The Fed will be inclined to raise rates sooner rather than later.”

Gold tumbled 28 percent last year and investors dumped ETPs on expectations for reduced U.S. stimulus as the economy improved.
China Probe

China sent investigators to the southern province of Guangdong to look into precious-metal shipments that soared sevenfold to $10.8 billion in September from a year earlier as the government intensifies scrutiny of irregularities in the country’s trade figures.

On the New York Mercantile Exchange, palladium futures for delivery in December fell 2.1 percent to $783.90 an ounce. The price rose in the previous nine sessions, the longest rally in two months.

Platinum futures for January delivery declined 1.8 percent to $1,245.60 an ounce, poised for the largest decline since Oct. 3.


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