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) --

Gold prices

were plummeting on Thursday as lower inflation projections from the

Federal Reserve

triggered traders to test the yellow metal's lowest price level since September 2010.

Gold for August delivery at the COMEX division of the CME was tumbling $70.40 to $1,303.60 an ounce. The

gold price

traded as high as $1,351.20 and as low as $1,285 an ounce.

"We are somewhat surprised by the strong reaction of the gold price to the Fed's meeting, since the Fed is only adhering to its long-known and publicized plan," Commerzbank AG wrote in a note on Thursday morning.

Silver prices

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for July delivery were charging lower by $1.56 to $20.06 an ounce, while the

U.S. dollar index

was popping 0.65% to $81.87.

Gold also received a downgrade from UBS as the bank noted that Fed Chairman Ben Bernanke's comments led the one-month projections to tick down to $1,250 from $1,425 an ounce.

UBS noted in its research that it expects the central bank to taper monetary stimulus by the fourth quarter of 2013, and that it had raised outlook for the benchmark 10-year Treasury note by 30 basis points to 2.5%.

"This creates an increasingly difficult environment for gold. Slowing Fed asset purchases with the end now potentially in sight, higher yields, a stronger dollar and continued improvements in the economy are significant obstacles that perpetuate an already very weak investor sentiment," the UBS note said.

In Asia, where physical demand has offered bottom support to the bear gold market, Indian imports of gold could decline by 30%, according to a note by Peter Hug, global trading director at Kitco Metals. This is in direct consequence to the Indian government's decision to tax imports into the country due to a widening trade deficit there. Gold is one of the key commodities driving the larger deficits there.

-- Written by Joe Deaux in New York.

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