WASHINGTON (dpa-AFX) - Gold prices dropped to a three-week low on Thursday, extending losses from the previous session, as the dollar climbed higher against its peers after the Federal Bank signaled that it would start rising interest rates in March.
The dollar firmed amid falling risk sentiment and rising government bond yields after the Fed signaled a rate hike quickly in the wake of high inflation and a strong labor market.
The Fed said on Wednesday that it would be appropriate to raise rates soon to contain a spike in inflation that is running well above its goal. It indicated that it would begin to shrink its balance sheet after starting to raise rates.
The accompanying statement from the central bank said, 'With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.'
The dollar index climbed to 97.29, gaining more than 1.4%.
Gold futures for February ended down by $36.60 or about 2% at $1,793.10 an ounce, settling below the $1,800 mark for the first time since January 10.
Gold futures for April, the most active contracts, ended lower by $37.00 at $1,795.00 an ounce.
Silver futures for March ended lower by $1.131 at $22.676 an ounce, while Copper futures for March settled at $4.4235 per pound, down $0.0915 from the previous session.
In economic releases today, data from the Commerce Department showed real gross domestic product spiked by 6.9% in the fourth quarter after jumping by 2.3% the third quarter. Economists had expected GDP to surge up by 5.5%.
Economists had pointed out the strong GDP growth was primarily due to a massive surge in business inventories, which added 4.9 percentage points, the second largest contribution since 1987.
The Labor Department's report showed initial jobless claims pulled back in the week ended January 22nd following a bigger than expected increase in the previous week.
The report said initial jobless claims fell to 260,000, a decrease of 30,000 from the previous week's revised level of 290,000. Economists had expected jobless claims to drop to 260,000 from the 286,000 originally reported for the previous week.
Meanwhile, separate reports from the Commerce Department and the National Association of Realtors showed steeper than expected drops in durable goods orders and pending home sales in the month of December.
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