Spot gold drops 1% as Fed ends QE
San Francisco (Oct 29) Gold prices tumbled on Wednesday after the Federal Reserve ended its two-year-old bond-buying stimulus, known as quantitative easing, as the U.S. economy gathers momentum.
The central bank also signaled confidence the U.S. economic recovery would remain on track despite signs of a slowdown in many parts of the global economy.
Gold has benefited from the low interest rates and increased liquidity that have dominated Fed policy in the years after the 2008 financial crisis.
Keeping U.S. interest rates lower for a longer period bodes well for a non-interest bearing asset such as gold.
Spot gold was down 1 percent at $1,213 after edging higher on Tuesday. U.S. gold futures settled $4,50 lower at $1,225.90 an ounce.
Data released on Tuesday gives the U.S. central bank reason to hold off from tightening its monetary policy, with demand for U.S.-made capital goods falling the most in eight months in September.
The U.S. housing sector also remained largely soft. The S&P/Case-Shiller composite index of home prices in 20 metropolitan areas gained 5.6 percent in August from a year earlier, the slowest annual increase since November 2012.