Gold Prices Plunge on Positive GDP Data
NEW YORK ( TheStreet) -- Gold prices plunged for the second time in three days after a better-than-expected gross domestic product report led many investors to flee from the yellow metal. Gold lost 0.18% on Wednesday .
Gold for February delivery was sinking $19.60 to $1,648.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,672.80 and as low as $1,643.60 an ounce, while the spot price was plummeting $26.90, according to Kitco's gold index.
"GDP improvement points directly towards the potential that we'll see
The Federal Reserve last week announced a fresh quantitative easing program that would purchase $45 billion of longer-term Treasury bonds per month for an open-ended period. It made the unprecedented decision to tie the duration of the new easing measures to economic targets -- a dip to 6.5% unemployment rate and inflation at about 2.5% would trigger expiration.
The Bureau of Economic Analysis' third read on third-quarter U.S. gross domestic product hit 3.1%, which was up from the prior estimate of 2.7% and better than economists' expected print of 2.8%.
Stronger-than-expected economic reports typically don't bode well for gold, which many investors consider as a safe-haven investment during times of greater economic uncertainty. Traders view the yellow metal, traditionally, as a hedge against inflation.
The Labor Department revealed Thursday that initial jobless claims for the week ended Dec. 15 rose to 361,000, while economists had expected an increase to 357,000. The four-week moving average -- considered a better gauge of the economic indicator -- fell to 267,750, which was a decrease of 13,750 from the previous week.
An improving labor market would also suggest the economy could be slogging towards that 6.5% unemployment rate target. Though it may take a while, the possibility that the labor market is headed toward the goal instead of a retreat from it also indicates the eventual end to monetary stimulus.
Silver prices for March delivery were plunging $1.34 to $29.76 an ounce, while the U.S. dollar index was shedding 0.04% to $79.38.
The euro currency continued its slight rally against the U.S. dollar as it ticked up to $1.3236 from the prior day's close at $1.3227.
"The Euro now makes gold more expensive and the lack of inflationary expectations due to possible recession after fiscal cliff is on traders' minds," George Gero, precious metals strategist at RBC Wealth Management, wrote in a note on Thursday.