Gold Looking At $1000 As Cheap Oil Keeps Inflation Tame

Precious metals got the biggest hit from the FOMC statement along with the surge in US GDP. Silver seemed to get whammed harder than gold, falling 4% on Thursday and continued to fall during the Asian session on Friday. Silver is down 77 points at 16.343 plummeting to break recent lows. Silver dropped to the lowest since February 2010. Thursday’s economic news was encouraging. The nation’s gross domestic product rose 3.5 percent in the third quarter, the result of increase consumer, business and government spending. And initial claims for jobless benefits rose 3,000 to 287,000 in the past week. It was the seventh week in a row the number of claims has been below 300,000.

The world’s largest economy expanded at a more-than-estimated annualized rate of 3.5 percent last quarter, capping its strongest six months in a decade, while other data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years. An unexpected slowdown in German inflation stoked concerns Europe will slip into a recession just as U.S. bond buying ends.

Gold weakened to trade below the 1200 level down 90 cents to trade at 1197.70. The greenback rose 0.2 percent to $1.2613 against the euro after earlier appreciating to $1.2548, the strongest level since Oct. 6. The shared currency is headed for its biggest annual drop since 2005. The dollar added 0.3 percent to 109.21 yen, and reached three-week intraday high of 109.47.

Slower-than-expected inflation in Germany may not bode well for the euro area, where price gains have been less than the European Central Bank’s goal. Data on Friday will show euro-area consumer prices rose 0.4 percent this month from a year earlier, according to a survey of analysts.

Greek bonds fell, sending 10-year yields up 48 basis points, or 0.48 percentage point, after Minister of Administrative Reform Kyriakos Mitsotakis said investors face a roller coaster ride as the government tries to contain the risk of snap elections. There was no support for gold as investors saw no need for the safety of holding gold as inflation remains tamed and the geopolitical situation remains quiet. Gold was languishing near a three-week low after the US Federal Reserve ended its bond-buying stimulus programme and expressed confidence in the economic recovery, dimming bullion’s safe-haven appeal. Gold is headed for the first consecutive monthly loss in 2014 after erasing gains for the year as the Federal Reserve ended its asset-purchase program amid signs of an improving U.S. economy.

The chances of gold tumbling to $1,000 an ounce are increasing as cheaper energy “means lower inflation and adds to the bearish gold story. Oil has collapsed into a bear market amid increasing global supplies. Lower oil prices will keep prices from climbing while offering a boom to economies and acts like stimulus adding billions of dollars to consumer pocketbooks.