Gold extends losses on Thursday on Fed's optimism about US economy

Gold extends losses on Thursday on Fed's optimism about US economy

29 January 2015, 09:45
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On Thursday the yellow metal extended losses from the previous session, as market players reassessed their expectations for the timing of the first U.S. rate hike after the Federal Reserve was optimistic about the economy.

The Fed said on Wednesday that it would keep rates on hold at least until June and reiterated its pledge to be patient on raising interest rates. The central bank acknowledged the solid economic recovery and strong growth in the labor market. The Fed also said it expected inflation to keep declining in the short term and added that it would take "financial and international developments" into account before deciding when to hike borrowing costs.

Hopes of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery dipped $6.60, or 0.51%, to trade at $1,280.60 a troy ounce during European morning hours.

Prices held in a range between $1,278.30 and $1,286.50. A day earlier, gold lost $5.70, or 0.44%, to settle at $1,287.20.

Futures were likely to find support at $1,273.00, the low from January 27, and resistance at $1,300.20, the high from January 26.

Also on the Comex, silver futures for March delivery declined 27.5 cents, or 1.52%, to trade at $17.81 a troy ounce. On Wednesday, silver eased up 0.4 cents, or 0.02%, to end at $18.08.

Later in the day, the U.S. was to publish the weekly report on initial jobless claims as well as private sector data on pending home sales. On Friday, the U.S. will release preliminary data on fourth quarter growth, which is expected to show expansion of 3.0%.

Copper for March delivery shed 3.6 cents, or 1.44%, to trade at $2.444 a pound. The March contract hit a five-year low of $2.419 on Monday. The red metal is down approximately 11.5% so far in January as concerns over the global economic outlook and the impact on future demand prospects dampened the appeal of the commodity.

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