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Gold sinks to levels not seen since 2010 as BOJ rallies dollar

October 31, 2014

Madrid-Spain (Oct 31)   Gold took a hard fall on Friday, hitting levels not seen since 2010, as the dollar surged in the wake of a surprise stimulus move from the Bank of Japan.

Expanding on losses from Asia and Europe, gold for December delivery GCZ4, -2.93%  slumped $36.80, or 3%, to $1,162.60 an ounce. December silver SIZ4, -3.38%  gave up 57 cents to $15.84 an ounce.

A more hawkish-than expected U.S. Federal Reserve statement has already been weighing on gold this week. The Fed‘s official ending of its bond-buying stimulus program on Wednesday smacked prices hard, as gold shed 2.2% amid signs of a healing economy. The U.S. economy expanded 3.5% in the third quarter, data showed Thursday.

“The surprisingly robust US GDP figures yesterday confirmed the Fed’s more optimistic economic outlook of the day before and thus indirectly dampened demand for gold as a safe haven,” said analysts at Commerzbank, in a note.

Gold got further pummeled after the Bank of Japan shocked markets with a move to expand the pace of quantitative easing, triggering a 5% surge in the Nikkei 225 index NIK, +4.83% The dollar USDJPY, +2.76% touched its highest level against the yen since January 2008.

The central bank expanded the size of its Japanese Government Bond purchases to the equivalent of “about 80 trillion yen” ($727 billion) a year, a rise of ¥30 trillion on the previous amount. It also said it would buy longer-dated JGBs, and triple its purchase of exchange-traded funds and real-estate investment trusts.

Gold losses speeded up as a pageant of economic numbers rolled out, including one that showed a slowdown in consumer spending.

Commzerbank said gold has taken out its psychologically important $1,200 per troy ounce mark, but also its four-year low of around $1,180.

Jim Wyckoff, Kitco analyst, is more pessimistic on gold than he has been in a while, and he says prices of the yellow metal could be in trouble if they don’t hold the $1,183 level.

“If [gold] prices fall below that, you’ll probably see a stiff leg down in prices, and a challenge of $1,000 could not be ruled out,” he warned in a video interview.

Elsewhere in metals trading, January platinum PLF5, -1.78%  fell $23.90, or 2%, to $1,222 an ounce. December palladium PAZ4, +0.47% rose $1.45 to $782.15 an ounce. High-grade copper for December delivery HGZ4, -0.29%  eased 1 cent to $3.05 a pound.

Source: MarketWatch

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