Gold Closes Near a 3-Week Low as Taper Talk Increases

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On Tuesday, gold (NYSEARCA:GLD) futures for December — the most active contract — fell $6.60 to close at $1,308.10 per ounce, while silver (NYSEARCA:SLV) futures edged 6 cents lower to finish at $21.64. Major exchange-traded funds, like the SPDR Gold Trust and iShares Silver Trust, also closed in negative territory.

Gold and silver both traded lower as the nation’s service sector performed better than expected last month, providing hope that the Federal Reserve will dial down bond purchases in December. The Institute for Supply Management reported that its services index rose 1 point to 55.4 in October, higher than estimates calling for a decline to 54. A reading above 50 indicates expansion.

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Twelve of the 18 industries tacked by the Institute for Supply Management reported growth last month, compared to only 11 in September. The ISM’s production gauge increased to 59.7 percent from 55.1 percent while the employment index jumped 3.5 points to reach 56.2, indicating growth in employment for the 15th consecutive month.

“After the October ISM Manufacturing last week suggested that the US economy isn’t in too poor of a position coming out of the government shutdown, the ISM Services index confirmed the improving conditions,” said Christopher Vecchio, a currency analyst at DailyFX. “These prints seem contradictory given the downtick in consumer confidence; perhaps this is an indication that the economy remains strong, and that consumption trends should rebound shortly. With US economic data improving, US Treasury yields increased following the data, indicative that traders believe a tally has been added to the ‘December taper’ column.”

By the end of trading Tuesday, shares of the SPDR Gold Trust (NYSEARCA:GLD) fell 0.2 percent while the iShares Silver Trust (NYSEARCA:SLV) increased 0.2 percent. Gold miner (NYSEARCA:GDX) Yamana Gold (NYSE:AUY) sank more than 2 percent, but Newmont Mining (NYSE:NEM) managed to close in positive territory. Shares of First Majestic Silver (NYSE:AG) also dropped 2 percent.

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Disclosure: Long EXK, AG, HL, PHYS

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