Gold Plunges To End At 4-Year Lows; Sheds 5.3% For Week
New York (Oct 31) Gold futures slipped to end at a more than four-year low on Friday, as the dollar continued to strengthen on some upbeat data from the U.S. and the Bank of Japan's decision to extend its monetary stimulus.
The dollar also got a boost after some upbeat U.S. GDP data yesterday, amid signs the Federal Reserve will lift interest rates early next year.
For the week, gold futures dropped about 5.3 percent.
The Bank of Japan's surprise decision to extend monetary stimulus has prompted investors to seek riskier assets. The Japanese central bank expanded its massive quantitative and qualitative easing unexpectedly as policymakers deemed it necessary to achieve the 2 percent inflation target even after a sales tax hike in April.
In some upbeat economic news from the U.S., consumer sentiment improved more than previously estimated in October, a Thomson Reuters and the University of Michigan report showed Friday.
Gold for December delivery, the most actively traded contract, plummeted $27.000 or 2.3 percent to settle at $1,171.60 an ounce on the Comex division of the New York Mercantile Exchange on Friday.
Gold for December delivery scaled an intraday high of $1,202.40 and a low of $1,160.50 an ounce.
On Thursday, gold futures ended down $26.30 or 2.2 percent at $1,198.60 an ounce, after data showed the U.S. economy to have grown 3.5 percent in the second quarter, exceeding analyst estimates.
The precious metal was also impacted after the Federal Reserve on Wednesday announced the end of its monthly asset buying program, QE3. The Fed said interest rates may remain at near zero for a "considerable time", but added that rate hikes may happen sooner than markets expect if economic recovery continued to gather steam.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, edged down to 741.20 tons on Friday, from its previous close of 742.40 tons on Thursday.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 86.81 on Friday, up from its previous close of 86.17 late Thursday in North American trade. The dollar scaled a high of 87.13 intraday and a low of 86.15.
The euro trended lower against the dollar at $1.2537 on Friday, as compared to its previous close of $1.2615 late Thursday in North American trade. The euro scaled a high of $1.2617 intraday and a low of $1.2488.
In economic news from the U.S., a report from the Commerce Department showed personal spending to have unexpectedly decreased in the month of September, dipping by 0.2 percent, after climbing by 0.5 percent in August.
Additionally, the Commerce Department said personal income edged up by a lower than expected 0.2 percent in September following a 0.3 percent increase in the previous month.
Consumer sentiment in the U.S. improved more than previously estimated in October, a report from Thomson Reuters and the University of Michigan showed Friday. The final reading on the consumer sentiment index for October came in at 86.9 compared to the mid-month reading of 86.4. Economists had expected the index to be unrevised.
With the unexpected upward revision, the index rose from the final September reading of 84.6 to reach its highest level since July of 2007.
Business activity in the Chicago area unexpectedly increased at a notably faster rate in October to its highest level in a year, a report from MNI Indicators said Friday. The Chicago business barometer jumped to 66.2 in October from 60.5 in September, with a reading above 50 indicating an increase in regional business activity. Economists expected the barometer to dip to a reading of 60.0.
Eurozone inflation rose slightly in October but it remained consistently below 1 percent, signifying the risk of deflation in the currency bloc. At the same time, the unemployment rate held steady at an elevated level in September.
Eurozone inflation rose marginally to 0.4 percent in October from 0.3 percent in September, flash data from Eurostat showed Friday. It has been below the 2 percent ceiling since February 2013. Core inflation that excludes energy, food, alcohol and tobacco, slowed to 0.7 percent from 0.8 percent a month ago. It was forecast to remain unchanged at 0.8 percent.
The Bank of Japan on Friday, decided to lift the monetary base at an annual pace of about JPY 80 trillion. The earlier plan was to increase it by about JPY 60-70 trillion. The bank will lift its purchases of Japanese government bond purchases so that the outstanding amount will rise by around JPY 80 trillion compared to the earlier target of JPY 50 trillion.
Russia's central bank lifted its key rate sharply by a bigger-than-expected 150 basis points to counteract the slide in ruble and rising inflation. The Bank of Russia decided on Friday to raise its key rate to 9.50 percent from 8 percent. The bank was expected to hike its rate by 50 basis points. This was the fourth interest rate increase this year.