Gold prices plunged sharply overnight, dropping during regular trading, and then extending their losses after hours as investors adjusted to the growing belief the US Federal Reserve will lift rates at its meeting in December.
Not even a weaker than expected first estimate of third quarter GDP (1.5% annual, down from 2.9% in the second quarter) could shake the belief that a rate rise is on the way.
Comex gold prices fell 2% or more during regular trading and settled at $US1,147.30 an ounce, a loss of $US28.80. Prices continued falling in electronic after hours trading and they were around $US1,145 in early Asian dealings – down $US31 an ounce or more than 2.6%.
Silver and copper prices also fell as the US dollar maintained its strength against other currencies – the Aussie dollar traded well under 71 US cents in Asia this morning. Iron ore prices eased a touch to closer to $US49 a tonne.
The local stockmarket will start trading this morning with a small fall, after Wall Street ended in the red. the falls in the prices of gold, silver and copper will see the likes of Newcrest, North Star and Evolution Mining hammered.
Newcrest has been already hit this week by rising concerns it won’t make its gold and copper production guidance because of worse than expected mechanical problems at its huge Cadia mine in central NSW (see separate story).
Comex gold prices ended at a three week low in New York after dropping the day before in after hours trading in the wake of the Federal Open Market Committee leaving the door open to a rate rise at its December meeting.
On Comex, other metals ended sharply lower. December silver futures dropped 74.3 cents, or 4.6%, to $US15.55 an ounce, while December copper lost 4.2 cents, or 1.8%, to $US2.321 a pound.
The first update on third quarter US economic growth was weak at first glance – but there was another quarter of strong consumer spending – up 3.2% against a final 3.3% in the second quarter.
Weak inventory growth held back growth and economists said if the second quarter inventory growth had continued into the third, there would have been little change in growth.
The other point is that the first GDP estimate will be the weakest – the second and third estimates will be based on more information, especially trade, personal consumption and investment. For that reason, the GDP report is not expected to impact Fed thinking on interest rates, but the October and November jobs reports will.
Our market starts with a loss of around 11 points or so on the ASX 200 after a slide yesterday (it was much larger at one stage). Driving prices lower was the shock first quarter sales and profit update from Woolworths which showed the country’s biggest retailer is in the midst of a profit shock that will worsen, not improve.
Weakness in bank shares, led by a big fall in the price of the NAB, and a smaller one for the ANZ after their full year reports, also drove the market lower.
The ASX200 lost 1.2% per cent to 5266.9.
But watch for some initial confident reaction among food-related stocks (and Blackmores, which topped $200 yesterday) in the wake of the announcement from China that the one child policy was over and couples could now have two kids.
That is expected to drive demand for dairy products, vitamins and other nutritional products. The Blackmores JV with Bega yesterday to produce infant formula, is an example of how local companies are positioning themselves. Another form of gold mining?
