Gold drops as Fed keeps QE intact
London (Oct 31) Gold lost ground during Thursday's trading session following the Federal Reserve's (Fed) decision to keep its easing policy intact after its two-day meeting that ended Wednesday.
Gold contracts for December were traded 1.14% lower at $1,334.10 an ounce on New York's Comex at the time of updating, while silver futures plunged 2.85% to $22.330 at the same time.
The US dollar index, measuring the relative strength of the greenback against a basket of six major currencies, was slightly lower 0.01% at 79.7860 at the time of writing.
Holdings in the SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, stood at 872.02 tonnes on Wednesday.
Fed's QE stays intact
To help the economy overcome these growth-restraining fiscal policies, the Federal Open Market Committee (FOMC) decided to keep its large-scale asset purchases at a monthly pace of $85 billion for another seven weeks. The decision reflects the damaging effects of the congressional standoff earlier this month.
As was largely expected, the central bank will continue to add $40 billion in mortgage-backed securities and $45 billion in treasury securities to its now over $3.8-trillion balance sheet.
The main policy tool, the federal funds rate, will also stay at 0% to 0.25%, where it has now been for nearly five years. The key rate will stay at its effective lower bound at least until the jobless rate falls to 6.5% or inflation tops the 2.5%-mark, policymakers decided, confirming the forward guidance adopted earlier this year.
As for economic data, ADP non-farm employment in the US increased by 130,000 in October, compared to a downwardly revised rise of 145,000 recorded a month before, while a pickup of 150,000 had been forecast.
The official unemployment rate for the nation, meanwhile, ticked down ever so slightly to 7.2%, from 7.3% in the previous month.
In the meantime, gold prices have fallen nearly $500 an ounce or almost 20% over the past year, and will most likely book their first yearly loss after 12 consecutive years of gains. The anticipated end of the 'easy money' era together with administrative restrictions on import of physical gold to India have been largely behind the metal's drop.
Physical buying in Asia, especially China, has slowed in recent weeks with the rise and volatility in prices.
