Gold prices stuck to a tight range of just over $10 an ounce ahead of the Fed decision
Bullion metals ended moderately higher on Wednesday, 18 December 2013. During the regular session on Wednesday, gold prices stuck to a tight range of just over $10 an ounce ahead of the Fed decision, which came after the close of gold trading on Comex.
Gold for February delivery settled at $1,235 an ounce on the Comex division of the New York Mercantile Exchange on Wednesday, up 4.90, or 0.4%. Immediately after the Fed said it would reduce the pace of monthly asset purchases to $75 billion from $85 billion, gold prices fell from their Comex settlement price then recovered to trade a bit higher.
March silver was last at $20.03 an ounce in electronic trading, after tacking on 22 cents, or 1.1%, to close at $20.06 an ounce.
U.S. gold futures came under pressure late Wednesday as equities surged, but overall the downside has been limited so far in the aftermath of an announcement from the Federal Open Market Committee announcing the start of tapering of quantitative easing. However, the Fed announced a slight reduction in its bond purchases after a two-day meeting Wednesday. Policy-makers said they will cut back to $75 billion in monthly purchases of Treasury bonds and mortgage-backed securities, compared to $85 billion previously.
Although the Federal Open Market Committee reduced the size of its monthly asset purchases from $85 billion to $75 billion, it pledged to keep the target Fed Funds Rate near its current levels 'well past the time that the unemployment rate declines below 6.5%.'
The precious metal has been under pressure for much of 2013, most often blamed on a rotation of investment capital into the soaring stock market and gold traders factoring in the expected scaling back of the bond-buying program known as QE. The market consensus was for the Fed to not start tapering until the first quarter of 2014, although this week's meeting was considered a possibility after two straight U.S. jobs reports showing gains of 200,000 in nonfarm payrolls.
Today's economic data focused on housing. The weekly MBA Mortgage Index fell 5.5% to follow last week's 1.0% increase. November building permits rose to 1,007,000 from the prior month's upwardly revised rate of 1,039,000 (from 1,034,000). That was above the pace of 983,000 that had been expected by market.
Regarding Housing Starts, September starts came in at 873,000 while the consensus expected a reading of 915,000. For October, Housing Starts were reported at 889,000 against the 920,000 expected by the consensus. Lastly, November starts increased to 1,091,000 while a reading of 950,000 was broadly anticipated.
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