Prices hit on concerns that the Fed could scale back its stimulus next week
Bullion metals ended sharply lower on Thursday, 12 December 2013 at Comex. Gold futures took a hit on Thursday as concerns that the Federal Reserve could scale back its stimulus next week pulled prices down by more than $30 an ounce for their biggest one-day loss since October.
Gold for February delivery dropped $32.30, or 2.6%, to settle at $1,224.90 an ounce on the Comex division of the New York Mercantile Exchange.
March silver also sank 90 cents, or 4.4%, to $19.55 an ounce.
Selling interest in gold Thursday was also partly attributed to the U.S. budget deal reached between congressional Democrats and Republicans this week. The budget agreement is another factor that could work in favor of the U.S. Federal Reserve tapering its monthly bond-buying program sooner.
Traders and investors are looking forward to next week's meeting (December 17-18) of the U.S. Federal Reserve's Open Market Committee (FOMC). Recent upbeat U.S. economic data also suggests the Fed might move up its timeline for implementing a tapering of its monthly bond-buying program, also called quantitative easing, including a growing number who think the Fed will announce a tapering at next week's FOMC meeting.
In overnight news, industrial output in the European Union fell sharply in Octoberdown 1.1% from September and the steepest monthly decline in a year. Forecasts were for the number to be up 0.2%. This report is one more argument for the European Central Bank to keep its monetary policy very accommodative. ECB president Mario Draghi on Thursday reiterated his desire to keep the ECB's easy money policy in place and he also said deflation is not a problem in the EU.
U.S. economic data was a mixed bag Thursday. Weekly jobless claims rose more than expected, but so did the latest monthly retail sales data. Initial claims for the week ending December 7 spiked to 368,000 (consensus 315,000) from 300,000. The Department of Labor said it is still experiencing problems with seasonal adjustment volatility, which means the headline is probably not as disappointing as it seems at first blush.
Separately, the retail sales data produced a cleaner read of things and it has painted a mostly encouraging picture for personal consumption activity. Retail sales increased 0.7% overall in November following an upwardly revised 0.6% increase (from 0.4%) in October. Excluding autos, retail sales increased 0.4% on top of an upwardly revised 0.5% increase (from 0.2%) in October.
Sales gains were pretty broad-based. The notable exceptions were gasoline station sales (-1.1%), which tracked lower gasoline prices and clothing and accessories stores (-0.2%), which tailed off following a strong 2.6% increase in October.
Also of note, October business inventories increased 0.7% after increasing 0.6% in September. The consensus expected business inventories to increase 0.3%. The big upward surprise in inventories resulted from a large surprise in the previously released wholesale inventories report.
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