Daily Gold Update

Source: Marketwatch

San Francisco— Gold futures extended their losses from Tuesday's regular session into electronic trading, but pared declines after the U.S. Federal Reserve decided to leave overnight interest rates unchanged at 5.25%.

"Gold's reaction was slightly positive as it gives investors a reason to want to hold long positions," said John Person, president of National Futures Advisory Service.

"The economy is still at risk to inflation, the Fed did not raise rates and thus it can foster the opportunity to fall behind the inflation fighting campaign, especially if the inventory of homes decreases and if energy prices escalate," he explained.

"Gold should be a buying opportunity based on today's announcement," he said.

Prices of the precious metal continued lower in after-hours trading after the Fed decision. See full Fed story. The decision came 45 minutes after the official close of regular-session metals trading in New York.

Shortly after the announcement, the February contract for gold futures traded at $632.90 an ounce, down $1.90 in electronic trading after reaching a low of $630.90 earlier.

Ahead of the Fed decision Tuesday, gold for February delivery had ended its regular trading session at $631.70 an ounce on the New York Mercantile Exchange, down $3.10. On Monday, the contract closed higher, recovering some of last week's 3% loss and supporting metals and mining shares.

On Tuesday, the dollar rose against the yen after the Commerce Department said the U.S. trade deficit narrowed by 8.4% in October to $58.9 billion, its lowest level since Aug. 2005. The reading was well below the consensus forecast of Wall Street economists of a deficit of $63.1 billion.

Other metals ended the regular session lower, with the exception of platinum, which saw its January contract add on $5.80 to close at $1,115 an ounce.

March silver futures closed down 4.5 cents at $13.98 an ounce, March palladium dipped $2.85 to end at $330.90 an ounce and March copper fell by 3.9 cents to close at $3.0945 a pound.

On the supply side, gold inventories were flat at 7.49 million troy ounces as of late Monday, according to Nymex data. Silver supplies were flat at 110.6 million troy ounces and copper supplies rose by 442 short tons to 32,651 short tons.

Metals shares continued lower along with gold, but some traded off their worst levels of the day after the Fed announcement.

Apex Silver Mines was one of the biggest movers in the Philadelphia Gold and Silver Index, with the company's shares down 3.4%. The index lost 1% to stand at 143.59.

The CBOE Gold Index fell 1.2% to 150.83 and the Amex Gold Bugs Index was at 343.68, trading 1.3% lower.

The DJ Wilshire Nonferrous Metals Index fell 0.9% to trade at 6,034.26, the DJ Wilshire Industrial Metals Index was down 3.3% at 3,334.57 and the DJ Wilshire General Mining Index fell by 3.2% to trade at 1,353.09.