The gold price on Thursday gave up hard fought gains wracked up on Wednesday after a decision by the US Federal Reserve to throttle back its economic stimulus program.
On the Comex division of the New York Mercantile Exchange, gold futures for April delivery – the most active contract – last traded at $1,243.30 an ounce, shedding $18 from yesterday's close.
The Federal Open Market Committee as widely expected announced another $10 billion a month cut to purchases under its quantitative easing program.
The move boosted the dollar, which usually moves in the opposite direction to the yellow metal.
Gold was also hurt by a turnaround in fortunes on US stock markets which have endured a steep losses for the better part of a week.
US stocks gained after news that the world's largest economy grew by a stronger than expected 3.2% in the final quarter of last year.
The gold price has been moving higher in recent weeks on safe haven buying as emerging markets tumble and currencies crash, but a dearth of fresh fallout from the likes of Turkey, South Africa and India diminished the metal's allure as a safe haven.
Investment and bullion bank Credit Suisse came out with a research note on Thursday predicting a drop for gold to $1,000 on the back of:
- a rise in real US interest rates
- subdued inflation expectations
- reduced systemic risk to the financial system and therefore less safe-haven buying
- a drop in Indian gold imports
- central bank unwillingness to stock up on gold even as prices fell