Gold drops as U.S. output gauge sparks dollar demand

Gold drops as U.S. output gauge sparks dollar demand

Submitted by caseyb23 on Fri, 11/01/2013 - 00:39

Gold drops as U.S. output gauge sparks dollar demand

Investing.com – Gold prices dropped on Thursday after data revealed that manufacturing activity in the Chicago region expanded at its fastest rate in 30 years in October, which sparked hefty demand for the greenback.

Gold and the dollar tend to trade inversely with one another.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,323.70 during U.S. afternoon hours, down 1.90%.

Gold prices hit a session low of USD1,318.80 a troy ounce and high of USD1,344.90 a troy ounce.

Gold futures were likely to find support at USD1,310.10 a troy ounce, the low from Oct. 22, and resistance at USD1,361.70, Monday's high.

The December contract settled up 0.28% at USD1,349.30 a troy ounce on Wednesday.

Data released earlier revealed that the Chicago manufacturing purchasing managers' index jumped to 65.9 in October from 55.7 in September.�

Analysts had expected the index to decline to 55.0.

The new orders component of the index jumped to a nine-year high of 74.3 from 58.9 in September.

The news fueled demand for the dollar by fanning sentiments that the U.S. economy will pick up the pace of its recovery and eventually prompt the Federal Reserve to wind down its USD85 billion monthly asset-purchasing program, which keeps the greenback weak to spur recovery.

Elsewhere, the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending October 25 declined by 10,000 to a seasonally adjusted 340,000, in line with market expectations.

Gold continued to come under pressure after the Federal Reserve's Wednesday announcement to leave its key benchmark lending target, the fed funds rate, unchanged at 0.25% and kept its USD85 billion monthly asset-purchasing program in place.�

The Fed said the economy was showing signs of improvement though it still faced enough headwinds to prompt monetary authorities to hold off on tapering its asset purchases, namely fiscal uncertainties that continue to drag on recovery.

Still, the language came across as less dovish than markets were anticipating, which pressured gold lower and boosted the dollar's appeal.

Elsewhere on the Comex, silver for December delivery was down 4.58% at USD21.930 a troy ounce, while copper for December delivery was down 0.78% and trading at USD3.300 a pound.