Forexpros – Gold futures extended sharp losses from the previous session on Wednesday, trading close to the lowest level in eight weeks after the Federal Reserve refrained from signaling another round of quantitative easing, dampening the appeal of the precious metal.
On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,639.75 a troy ounce during early European morning trade, tumbling 1.4%.
It earlier fell by as much as 1.75% to trade at a daily low of USD1,626.15 a troy ounce. Prices fell to USD1,625.55 on Tuesday, the lowest since October 21.
Gold futures were likely to find support at USD1,613.15 a troy ounce, the low of October 21 and resistance at USD1,681.55, the previous day’s high.
At its latest monetary policy meeting, the Fed said that the U.S. economy “has been expanding moderately,” despite slowing in global growth.
The Fed also reiterated a warning from its two previous meetings that “strains in global financial markets continue to pose significant downside risks to the economic outlook.”
The central bank made no changes to interest rates or its bond-purchase program, disappointing investors that were hoping for indications of a fresh round of asset purchases.
When the Fed announced the second round of quantitative easing, known as the QE2, in November last year, gold prices scored record highs for four consecutive sessions.
Also weighing on sentiment, German Chancellor Angela Merkel on Tuesday rejected the idea of boosting the EUR500 billion lending limit for the European Stability Mechanism, the region’s permanent bailout fund.
Meanwhile, markets were awaiting an auction of up to EUR3 billion in Italian five-year bonds later in the day, in what was being seen as a key test of investor confidence in Italian debt.
A broadly stronger U.S. dollar also added to selling pressure, as it makes dollar-denominated commodities more expensive for holders of other currencies.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, traded at 80.91, hovering just below Tuesday’s 11-month high of 81.11.
Elsewhere on the Comex, silver for March delivery dropped 1.25% to trade at USD30.87 a troy ounce, while copper for March delivery fell 0.85% to trade at USD3.412 a pound.
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