Big drop for bullions

Prices drop to their lowest level in a month

Bullion metal prices ended lower on Thursday, 12 September 2013 at Comex. Gold prices dropped more than 2% on Thursday as expectations that the U.S. Federal Reserve will announce a decision to taper its stimulus measures at a meeting next week helped push prices to their lowest level in a month.

Gold for December delivery ended lower by $33.20 (2.4%) at $1,330.6 an ounce on the Comex division of the New York Mercantile Exchange on Thursday.

December silver fell $1.02, or 4.4%, to $22.15 an ounce on Comex on Thursday.

Gold prices hit their daily low shortly after weekly U.S. jobless claims was released, showing a surprising 31,000 decline in the latest reporting week. Improved investor risk appetite is the feature in the market place this week. That has led to the unwinding of bullish gold bets, based on a U.S. military strike on Syria. However, the specter of U.S. military action against Syria has receded significantly this week, amid a Russian plan to have Syria's chemical weapons placed under international control. U.S. Secretary of State Kerry will meet with his Russian counterpart Thursday in Geneva, Switzerland, to discuss the matter.

Many traders and investors are looking ahead to next week's meeting of the U.S. Federal Reserve's Open Market Committee (FOMC). A majority of the market place believes the U.S. central bank at next week's meeting will announce it will begin to scale back, or taper its monthly bond-buying program. For the past several weeks the market place has been fixated on what the U.S. central bank will announce at the conclusion of next week's FOMC meeting. The selling pressure in gold and silver, and some other commodity markets, could also be tied to traders and investors anticipating the Fed tapering move next week.

On the economic front, weekly initial claims fell below the 300,000 level for the first time since March 2006. However, the Department of Labor said the sharp drop was due to computer problems. The initial claims level declined to 292,000 for the week ending September 7 from an unrevised 323,000 for the week ending August 31. The consensus expected the initial claims level to increase to 327,000.

The DoL announced that two states upgraded their computer systems, which resulted in an unexpected drop in claims. It is unknown how long the computer errors will remain in the system and it could affect the data for the next few weeks. It should be reiterated that the DoL does not believe the drop in claims this week signals a change in labor market conditions. Conditions remain better than where they were a few months ago but nowhere near as strong as a sub-300,000 reading would suggest.

Separately, export prices, excluding agriculture, ticked down 0.1% in August after an unchanged prior reading. Excluding oil, import prices declined 0.2%, which follows last month's decline of 0.4%.

At the MCX, gold prices for October delivery closed lower by Rs 661 (2.2%) at Rs 29,899 per ten grams. Prices rose to a high of Rs 30,561 per 10 grams and fell to a low of Rs 29,765 per 10 grams during the day's trading.

At the MCX, silver prices for December delivery closed lower by Rs 1,944 (3.7%) at Rs 50,495/Kg. Prices opened at Rs 52,140/Kg and fell to a low of Rs 50,337/Kg during the day's trading.

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