Gold Holds Decline From Record as Fed Commentary Sparks Caution
Gold held a decline, after it slipped from a fresh record in the previous session following the Federal Reserve’s much-anticipated announcement to cut interest rates.
The US central bank on Wednesday lowered the benchmark interest rate by a quarter percentage point and penciled in two more reductions this year. Gold briefly spiked to a fresh record of $3,707.57 an ounce following the announcement, as lower rates typically benefit bullion, a non-yielding asset.
Still, the precious metal closed the session 0.8% lower, as traders discerned the Fed’s tone on future monetary-policy decisions was less dovish than expected.
Fed Chair Jerome Powell expressed concerns about tariff-driven inflation pressures, saying the central bank was in a “meeting-by-meeting situation” with regards to additional rate moves. That pushed Treasuries lower across the curve while a gauge of the dollar rose, impacting bullion.
Gold has climbed nearly 40% this year, outpacing major assets such as the S&P 500 Index and eclipsing an inflation-adjusted record hit in 1980. Trade and geopolitical volatilities that boosted haven demand, along with central bank purchases and inflows to exchange-traded funds, have all supported the rally.
The rates decision also comes at an unprecedented time for the Fed. Governor Lisa Cook is in the middle of a legal battle with President Donald Trump, who sought to oust her on mortgage fraud allegations. Stephen Miran, the administration’s economic adviser, was fast-tracked into the central bank to fill a temporary vacancy and was the only governor who voted against Wednesday’s rates decision, preferring a half-point cut.
Political interference in the central bank’s independence could help drive gold higher. Goldman Sachs Group Inc. predicted that gold can rally to near $5,000 an ounce if just 1% of privately held Treasuries move to gold. The latest bull is Deutsche Bank AG, which on Wednesday raised its forecast to $4,000 an ounce next year.
Gold was little changed at $3,661.99 an ounce as of 8:50 a.m. Singapore time. The Bloomberg Dollar Spot Index edged up 0.1%. Silver, palladium and platinum all gained.
Source : Bloomberg.com
