By Tatyana Shumsky Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Gold prices tumbled 2% on better-than-expected factory orders and an unexpected growth in the service sector, as investors worried that upbeat economic data would dampen the size of the Federal Reserve stimulus program. The Federal Open Market Committee is widely-anticipated to announce Wednesday afternoon a second Treasurys purchasing program aimed at expanding the money supply and stimulating growth, despite risks of depreciating the dollar and raising inflation. Gold prices rallied to a record settlement of $1,377.60 per troy ounce on Oct. 14 on market anticipation of the program, as traders bought gold to hedge against currency and inflation risk. But upbeat economic data Wednesday saw gold prices tumble 2% as investors shed gold on worries the Fed stimulus would be pared back. The most actively traded contract, for December delivery was recently down 1.8%, or $24.50, at $1,332.40 per troy ounce on the Comex division of the New York Mercantile Exchange. The contract had traded near flat at the open, but posted a sharp $25 decline in the space of 30 minutes, after Commerce Department data showed September U.S. factory orders rose 2.1% to $420.02 billion. Economists surveyed by Dow Jones Newswires had expected overall factory orders would rise 1.6%. Separately, the Institute for Supply Management's index of overall service sector activity rose to 54.3 in October, from 53.2 in September. It had been expected to stand at 53.5. A reading above 50 indicates growth. "Seeing better economic numbers, the idea is entering people's heads that maybe we won't see as much QE, so they're coming in to liquidate some positions," said Sterling Smith, analyst at Country Hedging. "We've had a solid bull market from the start of August, and it might be time to take a bit of money off the table," he added. -By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com

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