Gold price momentum lost
The gold price on Thursday lost its recent upward momentum, as military action in Syria is delayed and strong economic numbers from the US dampen demand.
By mid- afternoon the yellow metal was trading at $1,405, down $15 from Wednesday’s close and losing sight of an intra-day high of $1,434 reached yesterday.
Doubts over airstrikes on Syria over its use of chemical weapons in its brutal 2-year civil war reduced safe-haven buying of gold and a revision to US GDP renewed fears that stimulus for the world’s largest economy may be coming to an end soon.
The US economy expanded at a more rapid clip in the second quarter than previous estimates showed, with gross domestic product up 2.5% at an annual rate in the second quarter according to data released by the US Department of Commerce.
The initial reading for April to June was 1.7% and the new 2.5% rate compares to Q1 stats of miserly 1.1% growth.
Precious metals investors had been worried that the US Federal Reserve will start tapering off its $85 billion a month monetary stimulus, which should boost the US dollar and hurt gold.
Today’s number may strengthen the Fed’s hand as it prepares to start winding down its QE program – the central bank meets again in September, October and December when it could make an announcement.
The stimulus program in the US and similar action in Japan, Europe and elsewhere have been a massive boost for gold as all the easy money sloshing around on financial markets burnishes bullion’s reputation as a storer of wealth.
Gold has rallied nearly 20% from the intra-day low of $1,182.60 an ounce hit on June 28 after comments from Fed chairman Ben Bernanke hinted that the reduction in QE purchases could start as soon as next month.