MW: Gold falls 1%; silver heads for six-session loss
U.S. fiscal-cliff talks, GDP in focus with silver suffering steep losses
By Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold futures fell about 1% Thursday, with silver prices headed lower for a sixth straight session, as U.S. fiscal-cliff talks stalled and the Commerce Department raised its estimate of third-quarter growth for the largest global economy.
Gold for February delivery GCG3 -1.30% fell $16.20 to $1,651.50 an ounce on the Comex division of the New York Mercantile Exchange.
Silver, which tends to track moves in gold but is historically more volatile than its counterpart, led the declines among the metals.
March silver SIH3 -3.67% sank $1, or 3.2%, to $30.12 an ounce. Prices for the metal have dropped about 8% in five trading sessions.
“With Japan and Europe in recession, and the prospect of spending cuts contributing to a reduction in U.S. GDP, gold may continue to struggle for the foreseeable future,” said Sonny Tahiliani, managing director of MacroMoves in New York. “But eventually, there will be a reflationary response from the Fed to prevent recession since an output gap in the U.S. persists.”
On Thursday, the Commerce Department said third-quarter gross domestic product grew at a seasonally adjusted annual rate of 3.1%, well ahead of the initial estimate of 2% growth and the most recent tally of 2.7%. See: Third-quarter U.S. growth revised higher.
‘Soft’ end to the year
Gold futures have fallen by nearly 2% over the past two trading sessions. They closed Wednesday at $1,667.70 an ounce, the lowest settlement price since Aug. 30.
Still, prices for the precious metal are more than 4% higher for the year to date.
“Gold has seen a soft end to the year, breaking with the tradition that is normally the strongest quarter,” said Ross Norman, chief executive of Sharps Pixley, in emailed comments.
“Too much has been made of regarding the fiscal cliff, which is really just the equivalent to 5% of GDP — as such, we seem to seeing some selling by disappointed longs plus a little profit taking on gains that now amount to 5% since the first fixing of the year. Gold ends a difficult year with a whimper,” said Norman.
Investors appeared to be less willing to take on risk Thursday amid apparent bumps in the road in U.S. debt negotiations to avert the so-called fiscal cliff — hundreds of billions in automatic tax hikes and across-the-board spending cuts that would take effect to begin 2013.
President Barack Obama said Wednesday he was “puzzled” that congressional Republicans had not taken up his latest offer in the talks, saying he’s gone “at least half way” to meet the other side’s concerns. In response, House Speaker John Boehner said the House will likely approve the Republican-authored “Plan B” to extend Bush-era tax cuts for incomes up to $1 million. Read: Republicans 'puzzling' on cliff deal, says Obama.
In recent days, equities and other riskier assets had been moving higher on indications that the two sides were inching toward a deal.
“As an investor taking the long view, gold remains an attractive asset class to be in, but some patience is required as the factors that got us here over the last few years remain,” said Norman.
For now, however, “short sellers, technical and momentum traders have the upper hand and are pressing their advantage in these less liquid holiday markets,” said Mark O’Byrne, executive director at Dublin-based GoldCore, in emailed comments.
Running down the other major metals contracts, copper for March delivery HGH3 -1.83% fell 8 cents, or 2.1%, to $3.53 a pound.
March palladium PAH3 -2.81% shed $12.05, or 1.7%, to $686.30 an ounce, while January platinum PLF3 -2.22% sank $28.80, or 1.8%, to $1,564.10 an ounce.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.
