Gold Erases Gains, Dips on Fed Minutes (Update1)

(Updated from 10:28 a.m. ET with settlement price and FOMC statement.)

NEW YORK (TheStreet) -- Gold prices sank on Thursday on a dour statement from the Federal Reserve. Gold had jumped $13, or 0.8%, on Wednesday, helped by the deal on the so-called fiscal cliff.

Gold for February delivery shed $14.20 to settle at $1,674.60 an ounce at the Comex division of the New York Mercantile Exchange on Thursday. The gold price had traded as high as $1,690.50 and as low as $1,662.70 an ounce. The spot price was dropping $20.40, according to Kitco's gold index. And the yellow metal plunged more than half a percent as the Fed's policy-making wing released its latest minutes.

The Federal Open Market Committee said there were potential risks to financial stability over a disorderly finish to the so-called fiscal cliff, impending discord about raising the debt ceiling and possible deterioration of conditions in Europe.

Notably, sentiment among the FOMC members was split.

"In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013," the minutes said.

Gold prices popped nearly $20 on Monday on President Barack Obama's optimistic remarks that a deal was in sight for Congress to avoid the so-called fiscal cliff -- when automatic deep-spending cuts and tax hikes were supposed to go into effect -- and then the precious metal surged another $13 in the first trading session after the deal passed.

Silver prices for March delivery fell 29 cents to close at $30.72 an ounce, while the U.S. dollar index was surging 0.65% to $80.37.

The Labor Department on Thursday said initial jobless claims for the week ended Dec. 29 rose by 10,000 to 372,000. Economists had expected 365,000 claims.

The report came as a prelude to Friday's monthly unemployment situation, in which gold investors will be keeping an eye on where the unemployment rate moved in December. This is because the Federal Reserve last month implemented a new open-ended, $45 billion a month purchasing of longer-term Treasury bonds with economic targets for interest rates that included a national unemployment rate drop to 6.5%, or if inflation exceeded 2.5%.

Analysts view stimulus as inflationary, which often boosts the value of gold.

The November unemployment rate printed at 7.7%, and consensus among economists polled by Thomson Reuters expect the rate to remain unchanged for the December report. Nonfarm payrolls are expected to rise by 150,000; November payrolls rose 146,000.

Sometimes seen as a barometer of the government's monthly employment situation, payroll processor Automatic Data Processing's monthly report said employers added 215,000 jobs in December. The number printed better than economists' expectation of 133,000, but investors should know that the ADP data often doesn't correlate with the government's numbers.

Gold-mining stocks were mostly lower on Thursday. Shares of Goldcorp (GG) were losing 4.7%, while Yamana Gold (AUY) was off 4.2%.

Among volume leaders, Barrick Gold (ABX) was dipping 2.7%, and Kinross Gold (KGC) was shedding 3.9%.

Gold ETFs SPDR Gold Trust (GLD) and iShares Gold Trust (IAU) each were losing 1.1%.

-- Written by Joe Deaux in New York.

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