Gold slides towards $1,200/oz after upbeat Fed statement

London (Oct 30)  Gold prices slid towards $1,200 an ounce on Thursday, hitting their lowest in 3-1/2 weeks, after the Federal Reserve ended its bond-buying stimulus programme on an unexpectedly hawkish note.

Spot gold fell as low as $1,201.21 an ounce and was down 0.5 percent at $1,206.40 an ounce at 1015 GMT. U.S. December gold futures were down $19 at $1,205.80.

The Fed statement on Wednesday sent the dollar to its highest since Oct. 6, while U.S. rate futures shifted to show better-than-even chances of a rate hike next September. Previously, they had indicated a rise in October.

That dented interest in gold, which as a non-yielding asset tends to benefit from ultra-low rates.

"I'm not saying that we're going to get a higher interest rate environment any time soon, but the signals are there," Simon Weeks, head of precious metals at the Bank of Nova Scotia, said. "$1,200 might hold today, but overall I think it will be broken, and we'll look at that double bottom at $1,180 again."

Gold, which hit a 15-month low of $1,183.46 earlier this month -- a level it had already bounced off in 2013 -- fell 1.3 percent on Wednesday after the Fed statement was released.

The U.S. central bank largely dismissed financial market volatility, a slowdown in Europe and a weak inflation outlook as factors that might limit progress towards its unemployment and inflation goals.

Ending its monthly bond purchases, the bank dropped a characterisation of U.S. labour market slack as "significant" in a show of confidence in the economy's prospects.

The U.S. Commerce Department will release gross domestic product figures at 1230 GMT. The economy is expected to have grown at a solid 3 percent annual rate in the third quarter.

SUPPORT AT $1,200/oz

Although gold prices are expected to find good support at $1,200 an ounce, a key psychological chart level, analysts said downward momentum remains strong.

"Overwhelming bearish pressures weigh on the metal, with both technical and fundamental indicators pointing lower," UBS said in a note. "(That could take) the price towards significant support at 1183.23, (the) October low, which also coincides with December 2013 low."

In a reflection of investor sentiment, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings fell 1.2 tonnes to 742.40 tonnes on Wednesday, a six-year low.

The fund reported its biggest weekly outflow this year last week. The outflows could undermine any possible rally in gold.

In the physical markets, too, buying interest fell. Premiums in top consumer China were about $1-$1.50 an ounce on Thursday, compared with about $2 on Wednesday.

"With the heightened negative sentiment, we expect to see even more scaled-up selling from the speculative community as well as producers who have been active on rallies over the last few weeks," MKS Group said in a note.

Silver was down 1 percent at $16.87 an ounce. Spot platinum was down 0.2 percent at $1,251.25 an ounce, while spot palladium was down 0.4 percent at $786.25 an ounce.

Source: Reuters