Gold Prices Extend Losses on QE Caution

Gold prices are extending losses Wednesday afternoon as investors await the next Fed Reserve move on quantitative easing.
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(Gold story updated with price changes.)
NEW YORK (TheStreet) -- Gold prices extended losses Wednesday as investors await the next Federal Reserve move on quantitative easing.

Pressure on gold prices continued to mount as the

Wall Street Journal

reported that the Fed Reserve could be more cautious than previously expected in its stance on quantitative easing.

Gold for December delivery was falling $13.80 to $1,324.80 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high $1,343.70 and as low as $1,318.60.

The

U.S. dollar index

was rising 0.5% to $78.12, while the euro was down 0.7% to $1.38 against the dollar. The spot gold price was down more than $15, according to Kitco's gold index.

EverBank World Markets president Chuck Butler noted in a daily report that

Goldman Sachs

(GS) - Get Report

economists estimated that the Federal Reserve may have to purchase a massive $4 trillion worth of assets such as Treasury securities to jump-start the economy.

"$4 trillion is a whole hell-of-a-lot more than the $1 trillion the markets are talking about," he said. "But here's the difference folks. Goldman is talking about 'how much quantitative easing (QE) needs to be done,' whereas the markets are talking about what they think the Cartel will do."

On Tuesday, gold prices were dampened amid mixed economic data and in the face of a higher dollar. Early Tuesday, the Federal Housing Finance Agency reported that home prices rose 0.4% from July to August. Economists thought the index would fall 0.2% after a downwardly revised month-over-month 0.7% decline reported in July. For the 12 months to August, prices declined by 2.4%, according to the agency. The U.S. index is 13.6% below its April 2007 peak.

Before the market open, it was reported that the S&P/Case-Shiller 20-city August home price index increased by 1.7% from August 2009, which was below the 2.1% growth predicted by economists, according to

Briefing.com.

The Conference Board's consumer confidence reading also came out Tuesday morning, showing an increase to a better-than-expected level of 50.2 from 48.6 in September. Economists had been expecting an October reading of 49, according to

Briefing.com.

"Despite better than forecast consumer confidence and Richmond manufacturing data, the recovering dollar weighed on risk sentiment over the course of the day as U.S. equities swung between positive and negative," FastMarkets research analyst James Moore said in a daily note.

This is in contrast to the pop in gold prices experienced on Monday after the weekend G20 meetings that concluded with finance ministers and central bank governors in Korea conveying to investors the likelihood that the dollar would come under continuing pressure.

In a daily newsletter, BullionVault's head of research Adrian Ash cited a China analyst quote by

Reuters

: "last weekend's G20 meeting only 'bought some time' before the US Congress will join the Senate in calling China a 'currency manipulator' ... 'doubtlessly, if the yuan is set to become an international currency like the dollar or the euro, China has to get a huge gold reserve to support it,' says Meng Qingfa, a researcher at the China Chamber of International Commerce, quoted by the International Business Daily -- the official newspaper of Beijing's Ministry of Commerce."

"'A reserve of 1,054 tonnes

of gold is far from being enough.'"

Silver prices

were losing 21 cents to $23.63, while copper prices were down 8 cents to $3.78.

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Gold mining stocks

, a risky but profitable way to

buy gold

, were trading in negative territory Wednesday afternoon.

Goldcorp

(GG)

was falling by 1.3% to $41.97, while

Agnico-Eagle Mines

(AEM) - Get Report

was losing 1.5% to $70.63.

AngloGold Ashanti

(AU) - Get Report

was surrendering 2.8% to $44.80, and

Market Vectors Gold Miners

(GDX) - Get Report

was lower by 2.4% to $54.48.

-- Written by Andrea Tse in New York.

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