This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Gold Prices Plummet as Bernanke Dashes Hopes of More Stimulus

NEW YORK ( TheStreet ) -- Gold prices were selling off Wednesday after Federal Reserve Chairman Ben Bernanke indicated that an additional round of quantitative easing was becoming increasingly unlikely.

Gold for April delivery was plunging $63.70 to $1,724.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,792.30 and as low as $1,708.40 an ounce while the spot price was losing $60.50, according to Kitco's gold index.

Silver prices were sinking $2.13 to $35.075 an ounce while the U.S. dollar index was rising 0.42% at $78.579.

Equities gave up early gains as Bernanke suggested that improvements in the U.S. economy may lessen the need for further monetary stimulus. In his semi-annual speech before Congress, Bernanke characterized the pace of economic growth as "uneven and modest by historical standards." However, he acknowledged some improvement in the labor market and said that headwinds like Europe and a weak housing market would fade beyond 2012.

The morning's rally had come as investors welcomed upbeat economic news. The Chicago purchasing managers index ticked in at a reading of 64 in February, beating the forecast for 61.5 from Thomson Reuters. The index rose to its highest level in ten months, suggesting that regional business has been picking up.



The U.S. government said that the economy grew at a pace of 3% in the fourth quarter, upwardly revised from its first estimate of 2.8%. Economists had thought the growth reading would stay unchanged, according to Thomson Reuters.

The European Central Bank said it lent a total of €530 billion to 800 financial institutions in Europe as part of its second round of long-term refinancing. Economists had expected the banks to soak up a sum in the €500 billion ballpark.

"Gold market participants are taking profit taking opportunity in conjunction with the Fed Chairman's comments regarding monetary policy," said Jeff Wright, senior research analyst with Global Hunter Securities. "With the recent run up in gold and silver; no fund manager wants to be the 'Bag-Holder' if a true correction back to the $1600 range occurs.... Our thesis of gradual appreciation is still intact but with periods of volatility in both gold and silver markets. I believe longer term investors will step in to support gold and silver if the sell off continues in the coming days."

Jon Nadler, senior metals analyst with Kitco Metals, noted that in addition to the doubts surrounding a third round of quantitative easing in the U.S., European stimulus may also begin fading.

"The ECB doled out more than $700 billion in loans to over 800 banks this morning in what may have been its last gesture of 'kindness' for a long time to come," said Nadler. "While many are calling the latest ECB operation a 'liquidity injection' that smacks of an outfight gift, we would be wise to note that the amounts in question are loans and that they have a three-year shelf-life."

Mining stocks were following metals lower. Among the biggest losers were First Majestic Silver (AG), down 4.2% to $20.85, and iShares Silver Trust (SLV), shedding 4.2% to $34.32. Novagold Resources (NG), was losing 3.7% to $8.26, and Newmont Mining (NEM) was down 3.3% to $59.93.

-- Written by Ross Tucker in New York.



>To contact the writer of this article, click here: Ross Tucker.

>To follow the writer on Twitter, go to http://twitter.com/rosstucker.

>To submit a news tip, send an email to: tips@thestreet.com.



Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs