Gold Prices Sink on Strong US Numbers
Frankfurt (Oct 31) Gold prices continue to lose ground on Friday, as the spot price trades at $1174.86 per ounce in the European session. Gold has slipped to its lowest level since 2014, and has tumbled 4.4% since Tuesday. Will the dollar rally continue? On the release front, today’s highlight is Revised UoM Consumer Sentiment. The markets are expecting the indicator’s upward trend to continue, with the estimate standing at 86.4 points.
It was another solid performance from US GDP, which posted a strong gain of 3.5% in Q3, ahead of the estimate of 3.1%. Although this was short of the Q2 reading of 4.0%, the two readings mark the strongest six-month gain we’ve seen in ten years. Unemployment Claims increased slightly to 287 thousand, slightly higher than the previous reading of 284 thousand. However, the four-week average remains at multi-year lows, pointing to an improving labor market.
The US dollar gained about 100 points on Wednesday, boosted by a hawkish Fed policy statement. The Fed said that the labor market is strengthening and inflation remains on target, although it did note that the labor market participation rate remains low. As expected the Fed completed the taper of its QE3 program. The asset-purchase program was initially started in 2008, at the height of the economic crisis, in order to boost a weak US economy. The termination of the QE is a symbolic step which is a vote of confidence from the powerful Fed that the US economy is on the right track.