Gold Drops With Silver, Oil as Dow Average Fails to Hold 16,000

New York (Nov 19)  Gold and silver sank with oil, while the dollar weakened against most peers and Treasuries rose as investors dissected speeches from Federal Reserve officials to gauge the outlook for stimulus. Most U.S. stocks fell after the Dow Jones Industrial Average exceeded 16,000 for the first time.

Gold and silver lost more than 1 percent as crude closed at a five-month low. The Bloomberg U.S. Dollar Index, which tracks the currency against 10 major peers, slipped to the lowest level in 1 1/2 weeks, while 10-year Treasury yields dropped four basis points. The Dow pared gains to 15,976.02 by 4:35 p.m. in New York. The Standard & Poor’s 500 Index fell 0.4 percent after climbing above 1,800 for the first time. The Hang Seng China Enterprises Index (HSCEI) rose 5.7 percent, the most since 2011.

Fed Bank of New York President William Dudley said while he’s “getting more hopeful” the U.S. economy is gaining strength, policy will probably remain accommodative for a long time. Janet Yellen, nominee for Fed chairman, said last week she wants to maintain bond purchases until the economy improves further. Investor Carl Icahn warned of a “big drop” in the stock market, Reuters reported. China’s leaders vowed to allow more private investment as part of a package of new reforms.

The dollar weakness “is partially being fueled by expectations the Fed taper will remain sidelined until next year, which is largely based on the testimony from Yellen last week,” Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange Inc., said in a phone interview.

‘Lingering Uncertainty’

Charles Plosser, president of the Philadelphia Fed, said the central bank’s policy committee needs to set a fixed size for its current quantitative easing program and “bring it to an end” after reaching that amount.

“We cannot continue to play this bond-buying game by ear and risk the Fed’s credibility while creating lingering uncertainty about the course of monetary policy,” Plosser said in text of speech in Philadelphia. Minutes of the last Federal Open Market Committee meeting will be published Nov. 20

Gold for December delivery declined 1.2 percent to $1,272.30 an ounce, the first drop in four days, while silver futures for delivery next month lost 1.8 percent to $20.357 an ounce. Platinum and palladium slid more than 2 percent.