NEW YORK ( TheStreet ) -- Gold prices tanked Thursday as investors dumped gold for cash after the Federal Reserve's downgrade of the U.S. economy fueled panic over a global double dip recession and led to a deep selloff in stocks.
Gold for December delivery closed $66.40 lower at $1,741.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,789 and as low as $1,723.20 while the spot gold price was down almost $41, according to Kitco's gold index.
Silver prices fell a massive $3.89 to close at $36.57 an ounce while the U.S. dollar index was adding 0.82% at $78.32. Silver was getting particularly slammed after HSBC's initial manufacturing reading out of China for September fell to 49.4. Anything under 50 signals lack of growth and the number ignited worries that China would slow its economy too fast. Preliminary readings in the Eurozone, France and Germany also fell with Germany's holding right at the 50 level.
Panic over growth was the market's takeaway from the Federal Reserve's Federal Open Market Committee announcement Wednesday. Its decision to launch operation twist -- buying longer dated Treasuries and selling shorter term ones -- was not a surprise, but its downgrade of the economy was. The Fed now sees "significant downside risk to the economic outlook" and investors think twisting is far from aggressive enough to combat that.
Investors rushed to the exit and piled into the U.S. dollar, about $3 away from its 52-week high, and Treasuries. Gold typically benefits from any big move into safety, but a stronger dollar was pressuring prices as was the need for cash. At its high Wednesday gold was up 28% for the year while the S&P is down almost 10%, which means gold is a prime outperforming asset to sell when times get tough. Traders have also been expecting some kind of correction to the $1,650-$1,680 an ounce level for a while and this downward move could lead the way. Oliver Pursche, co-portfolio manager at the GMG Defensive Beta Fund says "starting in mid-August
Alix Steel in New York.
>To contact the writer of this article, click here: Alix Steel.