Forexpros – Gold futures were down for a second day on Thursday, extending losses from the previous session as the U.S. dollar gained broadly after the Federal Reserve warned of “significant downside risks” for the U.S. economy.
On the Comex division of the New York Mercantile Exchange, gold futures for October delivery traded at USD1,771.65 a troy ounce during late Asian trade, tumbling 1.89%.
It earlier fell as much as 2.09% to trade at USD1,767.15 a troy ounce, the lowest price since September 16.
In a highly anticipated move, the Fed said it would buy USD400 billion worth of long-term Treasury bonds by June 2012, while selling an equal amount of short-term debt over the same period, in a move known as ‘Operation Twist’.
That “should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the Fed said in a statement.
However, the Fed warned of “significant downside risks to the economic outlook, including strains in global financial markets.”
The dollar strengthened across the board following the news. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.17% to trade at 78.55, the highest since February 16.
A stronger greenback usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Gold prices found support as the sharp price drop spurred some bargain-buying from investors in India, as consumers began stepping up purchases of bullion ahead of the gold-buying wedding and festival season due to start in late-September.
Despite the sharp pullback in prices, gold futures were expected to remain supported in the near-term amid ongoing concerns over the euro zone’s sovereign debt crisis and fears over the global economic outlook.
Elsewhere on the Comex, silver for December delivery dropped 2.65% to trade at USD39.39 a troy ounce, while copper for December delivery retreated 1.8% to trade USD3.629 a pound.
Forexpros
