Why Gold Prices Today Are at Three-Week Lows After FOMC Meeting

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SPDR Gold
NYSE: GLD
Oct 31
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Price: 112.66 | Ch: -2.53 (-2.2%)

Gold prices today (Thursday) (NYSE: GLD) continue to fall following U.S. Federal Reserve Chairwoman Janet Yellen's first-ever Federal Open Market Committee (FOMC) meeting, hitting a three-week low in early trading. The yellow metal's decreases over the last few sessions have obliterated all of March's gains, including a six-month high achieved on March 17.

Spot gold dropped as low as $1,320.24 an ounce, its lowest since Feb. 28; as recently as Monday, the metal was flirting with $1,400 an ounce. U.S. gold futures for April delivery fell to $15.30 an ounce at $1,326.00. Bullion for immediate delivery declined 0.5% to $1,323.18 in London.

The FOMC elected to trim its asset-purchasing program (quantitative easing) by another $10 billion to $55 billion per month and said it will slow purchases in "further measured steps."

Note: The Fed's 2014 taper means volatility ahead. So we've outlined how to find profits in a volatile market – like triple-digit gains in just days – if you start with this strategy…

But the bigger story affecting gold prices was the FOMC's decision to alter language on when the Fed would start to consider an increase in interest rates once U.S. employment reaches 6.5%. The new language provides the central bank greater discretion in the timeline for when a rate increase occurs, regardless of the national unemployment rate, which sits today at 6.7%.

gold prices today

Record-low interest rates over the last few years have been fueling gold, as they cut the opportunity cost of holding non-yielding bullion over other assets. Gold climbed 70% from 2008 to 2011 as the Fed pumped more than $2 trillion in stimulus money into U.S. financial markets, slashing interest rates to drive the economy.

On yesterday's news that U.S. interest rates could rise sooner than expected, gold promptly took its biggest one-day fall since January, dropping 1.8%.

"Gold was already on the defensive as safe haven bets were closed, and the Fed news added some additional pressure," Saxo Bank's head of commodities research Ole Hansen said to Reuters. "The market is now busy pricing in higher rates sooner than previously expected, and that could become poisonous for gold."

Gold prices today are also falling as the Fed's domestic news pushed the Ukraine-Russia conflict off the radar for the time being.

Gold, a safe-haven investment, had been moved higher and higher as tensions between Russia and the West increased throughout March.

"The risk related to Ukraine has not gone away, but moved to the sidelines for the time being," Hansen said.

NOW: This "forbidden" energy market is about to crack open…

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  1. H. Craig Bradley | March 22, 2014

    WHY THE MARKETS LIKE A WEAK PRESIDENT

    What if Obama and the Europeans actually agree and impose concerted "tough financial and economic sanctions" against Russia? Well, admittedly our commander and chief does very little "commanding" and sure does not garner a "command presence" with other heads of state. So, they tend to shy away from decisive action, something the French and other Europeans are well know for.

    Anyway, Putin could take the leash off of the Iranian Mullahs and say " sick" ( Israel). The most probable action on the part of the Military in Israel would be to launch an aggressive first strike against Iran and Tehran. This could really cause energy prices and gold to skyrocked to all time highs. The stock market and greater economy would stall-out immediately and we would head into a deep recession. Govt. revenues would drop and the debt would get bigger. We would all be in trouble if Obama was a real leader. Good thing for all of us in this instance he is not.

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