Precious metals drop for fourth straight session

Rally in U.S. dollar index and the FOMC news from Wednesday pressured precious metals

Prices for gold and silver futures were down for a fourth-consecutive session to their lowest settlement levels of the month so far on Thursday, 20 March 2014. However, both prices did finish nearer their daily highs as some bargain hunters stepped in to buy the dip and some short covering surfaced in gold futures. A solid rally in the U.S. dollar index the past 24 hours and the FOMC news from Wednesday pressured the precious metals markets again on Thursday.

Gold for April delivery fell $10.80, or 0.8%, to settle at $1,330.50 an ounce on the Comex division of the New York Mercantile Exchange. Prices had already tallied a loss of 2.7%, or nearly $38 an ounce in past threee sessions.

Silver prices took an even bigger hit on Thursday, with May silver losing 40 cents, or 1.9%, to end at $20.43 an ounce. Prices have lost about 2.7% over the past three sessions.

The market place on Thursday further digested the statement of the latest U.S. Federal Reserve Open Market Committee (FOMC) meeting that ended Wednesday afternoon, and Fed Chair Janet Yellen's press conference afterward. As expected, the FOMC will continue on its tapering program, whereby monthly bond purchases are whittled down by $10 billion a month. What rattled some markets, including gold, was an indication the Fed could begin to raise U.S. interest rates sooner than many expectsometime in 2015.

The U.S. dollar index surged following the FOMC developments, which in turn has been a bearish underlying factor for commodity markets, including gold. U.S. Treasury market prices have also slumped (yields rising).

U.S. economic data released Thursday included the weekly jobless claims report, existing home sales, leading economic indicators, and the Philadelphia Fed business survey. The data was mixed but did favor stronger readings, which supported the greenback and U.S. stock market, and in turn was a negative for the commodities.

The weekly initial claims level increased to 320,000 from an unrevised 315,000 while the consensus expected the claims level to increase to 330,000. Prior to the last couple weeks, the initial claims levelabsent unexpected seasonal biaseswas bounded between 330,000 and 340,000. The latest data show a slight downward move from that range, which could be the start of another stage in the improvement in labor market conditions.

Existing home sales fell to a seasonally adjusted annualized rate of 4.60 million in February from an unrevised 4.62 million in January. That was exactly what the consensus expected. For the second consecutive month, the National Association of Realtors blamed extreme winter weather conditions as a primary catalyst for the weakness in sales demand.

The Leading Indicators report for February increased 0.5%. That followed a 0.1% increase in January, and was better than the 0.3% uptick expected by the consensus. Manufacturing activity in the Philadelphia region ended a temporary contraction in March as the Philadelphia Fed's Business Outlook Survey increased to 9.0 from -6.3 in February. The consensus expected the index to increase to 2.0.

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