Gold Futures Decline to Lowest Since August on U.S. GDP Report

Gold futures fell to the lowest since August after a report showed the U.S. economy grew more than forecast last quarter, damping expectations that the Federal Reserve will expand monetary stimulus.

The U.S. grew at a 3.1 percent annual rate in the third quarter, more than previously reported and exceeding all projections in a Bloomberg survey, Commerce Department figures showed. The Fed said Dec. 12 it will boost its main stimulus tool by adding $45 billion of monthly Treasury purchases to an existing pledge of $40 billion in mortgage debt a month. The program is its third round of debt buying, known as quantitative easing, aimed at boosting expansion.

“The GDP number was better than forecast, so the thinking is that improving conditions in the economy might mean a light at the end of the tunnel on when the Fed will end QE3,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview.

Gold futures for February delivery fell 1.3 percent to settle at $1,645.90 an ounce at 1:56 p.m. on the Comex in New York, after touching $1,636, the lowest since Aug. 21. The price is up 5 percent this year.

The metal closed below its 200-day moving average, near $1,668, a bearish signal to some analysts who study historical price patterns. That means gold could drop to $1,535 by the end of the first quarter, Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, said yesterday.

Gold Options

The most-traded gold options today on the Comex were bets on further price declines. About 1,707 put options traded that give owners the right to sell at $1,600 by January. That compares with volume of 365 yesterday, exchange data show.

Prices have surged 86 percent since the end of December 2008 as the Fed kept borrowing costs at a record low and bought debt. Bullion is heading for a 12th annual gain after central banks from the U.S. to China and Europe took action to prop up economies.

Holdings in gold-backed exchange-traded products increased to a record 2,631.79 metric tons yesterday, data tracked by Bloomberg show. They’ve expanded 12 percent this year.

Silver futures for March delivery tumbled 4.6 percent to $29.678 an ounce on the Comex, the biggest loss since June. Earlier, the metal touched $29.635, the lowest since Aug. 22.

The ratio of gold’s price to silver climbed to as high as 55.47, the highest since August.

On the New York Mercantile Exchange, platinum futures for January delivery dropped 2.9 percent to $1,546.20 an ounce, a fourth straight decline.

Palladium futures for March delivery lost 2.6 percent to $680.25 an ounce, the biggest decline since Oct. 23.

To contact the reporter on this story: Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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Gold Futures Decline to Lowest Since August

Chris Ratcliffe/Bloomberg

The price may drop to $1,535 an ounce if it closes below the 200-day moving average, said Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus in Baltimore.

The price may drop to $1,535 an ounce if it closes below the 200-day moving average, said Dave Lutz, the head of exchange-traded fund trading and strategy at Stifel Nicolaus in Baltimore. Photographer: Chris Ratcliffe/Bloomberg

1:26

Dec. 20 (Bloomberg) -- The number of Americans filing first-time claims for unemployment insurance payments rose by 17,000 to 361,000 in the week ended Dec. 15, Labor Department figures showed today. The U.S. economy grew at a 3.1 percent annual rate in the third quarter, according to Commerce Department figures released today in Washington. Betty Liu and Dominic Chu report on Bloomberg Television's "In the Loop." (Source: Bloomberg)