Comex gold sags on pre-Thanksgiving profit taking, record low US core inflation

Gold on the Comex division of the New York Mercantile Exchange moved down Wednesday after the Commerce Department announced that US core inflation barely increased in October.

Gold futures for December delivery were recently off $5.40 at $1,372.20 an ounce with trade in a restrained range of $1,369 to $1,381.

Year-over-year core inflation rose an all-time record low of 0.9 percent in October, down from a 1.2 percent gain in September.

"Down the road inflation is going to be an issue, as the Fed will pump nearly $2 trillion of quantitative easing into the system via QE1 and QE2; however, these efforts have not yet achieved their goal as core inflation is less than 1 percent. That means that gold's attractiveness as an inflation hedge is minimal," a US-based precious metals trader said.

Earlier this month, the Federal Reserve announced that would buy $600 billion in additional Treasury bonds to combat high unemployment rates and boost inflation.

The trader added that there's still quite a bit of uncertainty in the market as it relates to the US economy and the sovereign-debt crisis in Europe.

"That's why we saw some profit taking as traders in America would rather get out of town to enjoy some turkey without worrying about being washed out on Friday," he said.

Sterling Smith, an analyst with Country Heading, said that gold also consolidated as there's the appearance that the situation on the Korean peninsula has deescalated.

On Monday, North Korea bombed the South Korean island of Yeonpyeong, killing at least two soldiers. The North Koreans attacked after warning the South to halt military drills in the area.

Generally, when there's a major geopolitical crisis gold benefits as it's seen as a safe-haven asset.

Smith added that gold has a past history of large moves, both up and down, the day after Thanksgiving.

"That's something that traders need to be aware of. As for today, most trading desks are winding down, especially in New York, where getting out of the city can be a nightmare," he said.

In other US macroeconomic news, the pace of layoffs slowed to the lowest level since July 2008 with initial jobless claims dropping by 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20, the Labor Department reported.

But new home sales rose just 283,000 last month, below an anticipated 311,000 and from 307,000 in September. That is the all-time low point since data collection began in 1963.

"The jobless claim number was the best we've seen in quite a while; however, the housing starts number is just terrible," Smith said.

Additionally, durable goods orders fell 3.3 percent in October on the previous month when growth of 0.2 percent had been forecast - orders had risen five percent in September.

The University of Michigan consumer sentiment index for November increased to 71.6, the highest since June, from 67.7 a month earlier. Expectations had been for an increase to 69.5.

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