Gold prices end slightly lower, extends decline after Fed policy statement

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Gold futures ended slightly lower on Wednesday, then extended their decline into the post settlement trading session after the Federal Reserve said the U.S. economy has made progress toward reaching its standards for tapering its bond-buying program.

The Federal Reserve concluded its two-day meeting on Wednesday. In a statement about a half-hour after gold futures settled on Comex, the central bank said the economy and job market have continued to strengthened and that higher inflation this year largely reflects transitory factors.

It also said the economy has made progress toward toward reaching the maximum employment and price stability goals it set for starting to slow down its bond-buying program. Not enough progress has been made to start tapering yet, however, and the Fed will “continue to assess progress in coming meetings.

“There was some hope among gold bulls that the spread of the delta variant might prompt the Fed to show a more-dovish tilt in its messaging today, but that didn’t happen,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.


“There was some hope among gold bulls that the spread of the delta variant might prompt the Fed to show a more-dovish tilt in its messaging today, but that didn’t happen.”


— Brien Lundin, Gold Newsletter

Instead, the Federal Open Market Committee “seemed to indicate, simply by omission of any references to the impact of the delta variant, that it remains on course toward eventual tapering when and if substantial, if still undefined, progress has been made toward its employment and inflation goals,” said Lundin.

“Given how much hype and expectation had been built around this Fed meeting, the ho-hum market reaction stands in stark contrast to expectations,” he said. “Gold is largely unchanged from its levels before the policy statement release, another indication that the pre-meeting status quo remains in effect.”

In electronic trading, August gold
GCQ21,
-0.12%

GC00,
-0.12%
was at $1,798.50 an ounce, down from its Comex settlement ahead of the Fed statement. The contract fell by a dime, or 0.01%, to settle at $1,799.70 an ounce Wednesday, after gaining just 60 cents on Tuesday. The December contract
GCZ21,
-0.09%,
which also among the most-active contracts, tacked on 60 cents, or 0.03%, to end Wednesday’s session at $1,804.60.

Looking ahead, Lundin expects the gold market to continue, along with every other sector, to “focus on Fed messaging.”

“Persistently high inflation numbers or signs that the spread of the delta variant is having a deleterious impact on the economy would be interpreted as bullish for gold,” he said. For now, however, the metal appears “range bound.”

Chairman Jerome Powell will hold a news conference at 2:30 p.m., where he will likely reiterate the central bank’s view that surging inflation is temporary. Any talk of timing of how and when to pare back the Fed’s $120 billion in monthly asset purchases will be closely followed.

In other metals trading, September silver
SIU21,
+0.94%

SI00,
+0.94%
added 23 cents, or 0.9%, at $24.88 an ounce, after shedding 2.6% on Tuesday.

September copper
HGU21,
-1.82%
lost 1.4% to $4.48 a pound. October platinum
PLV21,
+0.65%
rose 0.8% to $1,058.10 an ounce, but September palladium
PAU21,
+0.55%
settled at $2,622.60 an ounce, up 0.6%.

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