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Gold futures fell on Thursday, on track for the biggest daily decline in a week, as investors gravitated toward equities and away from assets perceived as havens.
The Federal Reserve on Wednesday signaled its intent to “soon” taper its bond purchases and raise interest rates by late next year, which could dim appetite for bullion if investors shift to assets that offer yields.
Specifically, the Fed said “if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted.”
The announcement “put the Fed on a more hawkish path, with its intentions turning in favor of tapering beginning November,” to be completed by June next year, and with sentiment strongly leaning toward at least one 25 basis point rate hike in 2022 and at least two or more rate increases in 2023, said Jeff Klearman, portfolio manager at GraniteShares, which offers the GraniteShares Gold Trust
BAR,
“The tilt away from easy money comes as the Fed’s ‘transitory’ inflation view shifts with growing concerns of higher, lasting baseline inflation,” he told MarketWatch.
December gold
GCZ21,
GC00,
traded $26.10, or 1.5%, lower at $1,752.70 an ounce, with the most-active contract on track to suffer their worst one-day dollar and percentage loss since Sept. 16, FactSet data show. Prices gained less than 0.1% on Wednesday. December silver
SIZ21,
SI00,
also fell 31.2 cents, or 1.4%, to $22.60 an ounce, following a 1.3% gain on Wednesday.
Meanwhile, the Dow Jones Industrial Average
DJIA,
and the S&P 500 index
SPX,
traded higher Thursday.
“Fed Chairman Powell at his press conference sounded upbeat on U.S. economic and jobs-growth prospects,” wrote Jim Wyckoff, senior analyst at Kitco.com, referring to Powell’s 2:30 p.m. Eastern Time media Q&A following the Fed’s updated policy statement.
“Judging by the positive reactions of stock and financial markets, the Fed meeting’s results, while not leaning dovish, were not too hawkish on U.S. monetary policy,” he wrote.
Still, real interest rates remain at historical lows, and it “does not seem likely they will be above zero any time soon,” Klearman told MarketWatch. “The market, at this point, believes the current, extremely low real-and nominal-rate environment will persist at least for the near future.”
That, combined with “fear of falling asset/equity levels, further fallout from Evergrande contagion, potentially spiraling inflation, historically high and growing U.S. deficits/debt levels and continued European Central Bank and Bank of England easy-money policies” are likely to provide solid support for gold prices,” said Klearman.
For now, gold prices fell toward the session’s lows after data Thursday showed initial jobless benefit claims rose to 351,000 from 335,000 in week ended Sept. 18. Continuing state jobless claims increased 131,000 to 2.71 million. On a more downbeat note, the IHS Markit flash U.S. manufacturing index fell to 60.5 in September from a previous reading of 61.1.
In other metals trading, December copper
HGZ21,
lost 0.7% to $4.22 a pound. October platinum
PLV21,
lost 0.9% to $992.40 an ounce and December palladium
PAZ21,
traded at $1,976 an ounce, down 3%.
