Big drop for bullions

Prices drop to five month lows

Gold prices ended the U.S. day session with sharp losses at Comex on Monday, 02 December 2013. Prices scored a five-month low as a firmer U.S. dollar index pushed gold and silver prices hard to the downside.

Gold for February delivery fell $28.50, or 2.3%, to settle at $1,221.90 an ounce on the Comex division of the New York Mercantile Exchange.

Silver fared worse on a percentage basis on Monday, with March futures for the metal down 3.7%, or 74 cents, at $19.29 an ounce.

Some generally upbeat U.S. economic data issued Monday boosted the greenback and also led to ideas the U.S. Federal Reserve may start to withdraw from its quantitative easing of monetary policy sooner rather than later.

Investors received just two economic data points today. After increasing a downwardly revised 0.1% (from 0.6%) in August, construction spending fell 0.3% in September before rebounding and increasing a solid 0.8% in October. The consensus expected construction spending to increase 0.4% and 0.3% in September and October, respectively.

The big gain in October spending came entirely from the government sector. Spending rose 3.9% in October, namely from an 8.5% gain in educational and a 5.9% gain in transportation. Private construction spending fell 0.5% in October after increasing 0.4% in September.

Separately, the November ISM Manufacturing Index increased to 57.3 from 56.4. That was the highest reading since the index reached 59.4 in April 2011. The consensus expected the index to fall to 55.5. For the past several months, regional manufacturing surveys have hinted at a slowdown in manufacturing activities, but the national ISM has shrugged those off and continued its trek higher.

This is a busy and important week for economic data. Focus of traders and investors is on the European Central Bank's monthly monetary policy meeting on Thursday. On Friday the U.S. jobs report is due. On Wednesday the U.S. Federal Reserve's beige book is to be released. These will likely provide at least some fresh insight on the timing of the Fed's next move. Meantime, the ECB has recently eased its monetary policy and the market place is wondering what ECB president Mario Draghi will say at this week's ECB meeting.

In overnight news, European stock markets were weaker due in part to some weak manufacturing data coming out of Spain. However, the overall manufacturing data coming out of the European Union showed a rise to 51.6 in November from 51.3 in October. Any reading above 50.0 suggests growth. There was a slightly upbeat report on China's manufacturing sector released over the weekend. This batch of economic data also worked against the gold and silver market bulls Monday.

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