Investing.com - Gold prices tumbled to a two-week low on Thursday, after the Federal Reserve signaled that a December rate hike was still on the table.
Gold for December delivery on the Comex division of the New York Mercantile Exchange sank $18.00, or 1.53%, to trade at $1,158.10 a troy ounce during European morning hours. It earlier fell to $1,155.00, the lowest since October 13.
A day earlier, gold jumped $10.30, or 0.88%, as investors priced in the release of a dovish monetary policy statement from the Federal Reserve.
The Fed left interest rates unchanged following a two-day policy meeting on Wednesday, as widely expected, but surprised the market with a hawkish statement, which included a direct reference to its next policy meeting.
"In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress - both realized and expected - toward its objectives of maximum employment and 2% inflation," it said.
The central bank's statement did not repeat that global risks would have a likely impact on the U.S. economy, as it warned at its last meeting in September. Investors interpreted that omission as a hawkish signal in deciding when to raise short term rates.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.
The surprisingly hawkish tone sent the U.S. dollar soaring against a basket of major currencies to its highest level in more than two months.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
Investors now looked ahead to key U.S. third-quarter growth data due at 8:30AM ET for further clues on the strength of the economy.
The report was expected to show that the economy expanded 1.6% in the three months ended September 30, slowing from growth of 3.9% in the second quarter, as a weaker global economy took its toll.
Market players have been trying to gauge when the Federal Reserve will raise interest rates for the first time in nearly a decade after recent economic reports offered a mixed picture of the U.S. economy.
The timing of a Fed rate hike has been a constant source of debate in the markets in recent months. The U.S. central bank has one more scheduled policy meeting before the end of the year in mid-December.
Concerns over a global economic slowdown led by China and its impact on U.S. growth prospects had prompted market participants to push back expectations for a rate increase to March 2016.
Elsewhere in metals trading, copper for December delivery on the Comex division of the New York Mercantile Exchange shed 2.1 cents, or 0.88%, to $2.342 a pound during morning hours in London.
Copper prices have been under pressure in recent sessions as persistent worries about future demand from top consumer China weighed.
The Asian nation is the world’s largest copper consumer, accounting for about 40% of world consumption last year.