Gold Prices Pare Initial Gains Due to Profit Booking, Silver Prices Down as Well
Gold prices slipped during Asian trading hours on Thursday as bullion investors looked to book profits after the metal logged 1.2% gain in previous session which was sparked by sour U.S. GDP data and the Federal Reserve’s reaffirmation on the continuation of its ongoing monetary easing. Silver prices also edged lower in early trading on Thursday.
At around 6:30 a.m. EST, gold futures for February delivery edged down 0.36% to $1,675.60 an ounce. Silver futures fell 0.66% to trade near $32 an ounce.
On Wednesday, February gold futures climbed $19.10 an ounce or 1.2% to settle at $1,679.90,having earlier touched an one week high of $1,683.89 after a preliminary data from the U.S. Commerce Department showed that the world’s largest economy contracted 0.1% YOY . Economists were expecting the GDP to grow in fourth quarter by 1%. The weaker than expected data dispelled fears that the Federal Reserve will cut short its ongoing monthly $85 billion worth bond purchase program.
Later, the Federal Reserve, as expected, confirmed in its policy statement that it will not halt its ongoing economic stimulating measures.
Bullion, which struggled to make any major headway since the start of New Year, hovering in tight band of $1,660-$1,690 an ounce, received some boost, as its inflation-hedge appeal burnished on Wednesday.
Although in the short term gold will face a strong resistance at $1,700, its long term outlook is bullish, according to many metal analysts thanks to ultra loose monetary policies adopted by global central banks. .
As quantitative easing entails rampant currency printing, investors fearing currency debasement, seek safety in inflation hedge assets such as gold.
“The Fed will maintain its bond buying policy and we see economic conditions in the euro zone improving slightly. I think we can see more weakness in the U.S. dollar and as a result we may see gold going up a bit more,” said Joyce Liu, investment analyst at Phillip Futures in Singapore, according to Thomson Reuters.
Still the metal is way below its historic high of $1,920, hit in September 2011, a time when euro zone crisis, weakness in the U.S. economy prompted investors to seek safety in safe haven instruments.