Gold Slides After Fed Drops ‘Considerable Time’ Pledge on Rates

San Francisco (Dec 17)  Gold prices fell amid concern that the Federal Reserve is moving closer to raising interest rates, cutting the metal’s appeal as a store of value.

Fed officials dropped a pledge to keep borrowing costs near zero percent for a “considerable time,” replacing it with a promise to be “patient,” according to a statement at the conclusion of a two-day meeting today.

“The precious-metals market is reading it as negative news,” Chris Gaffney, the senior market strategist at EverBank Wealth Management in St. Louis, said in a telephone interview after the report. “The Fed has changed its language, but is still on course to raise rates.”

Last month, gold reached a four-year low as signs of tighter U.S. money supplies drove the dollar higher and cut the appeal of bullion as a store of value. Investor demand for a hedge against inflation has also waned. The American cost of living fell in November by the most in almost six years, government figures showed today.

Gold for immediate delivery fell 0.9 percent to $1,185.76 an ounce at 3:19 p.m. New York time, after swinging between gains and losses.

On the Comex, gold futures for February delivery rose less than 0.1 percent to settle at $1,194.50 an ounce at 1:51 p.m. in New York.

Bullion surged 70 percent from December 2008 to June 2011 as central banks increased money supply on an unprecedented scale, spurring concerns that inflation would accelerate. The metal tumbled 28 percent in 2013, the biggest drop in three decades, amid gains for the U.S. economy.

Source: Bloomberg