Prices slip following a strong dollar
Bullion metal prices ended lower on Thursday, 07 November 2013Gold futures closed lower on Thursday as the U.S. dollar surged in the wake of the European Central Bank's surprise rate cut, drawing investors' attention away from the precious metal.
Gold for December delivery slid $9.30, or 0.7%, to settle at $1,308.50 an ounce on the Comex division of the New York Mercantile Exchange, though prices ended well above earlier lows under $1,300.
December silver slid 11 cents, or 0.5%, to end at $21.66 an ounce.
Prior to the open, the European Central Bank cut its key interest rate by 25 basis points to 0.25% after recent data suggested the price level is moving away from the ECB's inflation target. The ECB on Thursday cut its key benchmark interest rate, the refi rate, by a quarter of a percentage point Thursday to 0.25%.
The rate cut fueled a surge in the dollar while also sparking a risk bid. A stronger dollar tends to weigh on prices for dollar-denominated commodities.
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Among today's data at Wall Street, GDP increased 2.8% in the third quarter. That is up from a 2.5% increase in Q2 2013 and matches the best gain since Q3 2012. The consensus expected GDP to increase 1.9%. Final sales were up 2.0%, down slightly from a 2.1% increase in the second quarter.
Overall, the economy performed in the third quarter in a similar fashion to how it performed in the second quarter. Inventories contributed slightly more to growth (0.8 percentage points vs. 0.4 percentage points), which was the main difference between the two quarters. Inventories have now increased for three consecutive quarters and are due for a normal pullback soon. That could leave headline GDP growth coming in weaker in the coming quarters.
Separately, the weekly initial claims level declined to 336,000 from an upwardly revised 345,000 (from 340,000). The consensus expected the initial claims level to fall to 335,000. The Department of Labor stated that there were no unusual factors in the initial claims data. After two months of biases from computer glitches and the government shutdown, the initial claims report is giving a clean reading of the labor situation.
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