Gold Drops as Fed Cuts Bond Buying, Raises Rate Estimate

September 17, 2014

Washington (Sept 17)  Gold fell after the Federal Reserve reduced its bond-purchases program by $10 billion and raised its estimate for the federal funds rate next year amid signs that the U.S. economic recovery is gaining traction.

The Federal Open Market Committee said today that the economy is expanding at a moderate pace and inflation is below its goal. The officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.

The Fed reduced monthly bond purchases to $15 billion, keeping it on track to announce an end to the program in October. Gold dropped in the four of the past five weeks as equities surged and inflation remained low. The cost of living in the U.S. unexpectedly dropped in August for the first time in more than a year, a Labor Department report showed today.

Gold for immediate delivery fell 0.4 percent to $1,230.41 an ounce at 2:04 p.m. New York time. Prices rose 0.5 percent in the two prior sessions.

On the Comex in New York, gold futures for December delivery settled 0.1 percent lower at $1,235.90.

The metal tumbled 28 percent in 2013, ending a 12-year rally, on expectations that the Fed would scale back stimulus.

Source:  Bloomberg

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