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Gold Steadies After Losing ‘Mojo’ as Fed Set to Tri...

Business Maverick

Business Maverick

Gold Steadies After Losing ‘Mojo’ as Fed Set to Trim Stimulus

The World Gold Council thinks that throughout history less than 200,000 tons of gold have been mined. In 2012 Zimbabwe produced 20 tons. Nonetheless, in that year a major report commissioned by the Zimbabwe government on the mineral resources of Zimbabwe, estimated that the country contained 13 million tons of gold. (Photo: Waldo Swiegers / Bloomberg via Getty Images)
By Bloomberg
17 Jun 2021 0

Gold steadied after capping the biggest drop in five months as the Federal Reserve sped up its expected pace of policy tightening amid optimism about the labor market and heightened concerns over inflation.

Fed Chair Jerome Powell told a press conference Wednesday that officials would begin a discussion about scaling back bond purchases used to support financial markets and the economy during the pandemic. They also released forecasts that show they anticipate two interest-rate increases by the end of 2023 — sooner than many thought — and they upgraded estimates for inflation for the next three years.
Gold trades near six-week low as Fed signals stimulus pullback

Bullion’s trading near a six-week low as Treasury yields and the dollar surged after the Fed’s two-day gathering, which saw the central bank hold the target range for its benchmark policy rate unchanged at zero to 0.25%, where it’s been since March 2020, and maintain the $120 billion pace of its monthly bond purchases. Powell said the interest-rate forecasts “should be taken with a big grain of salt,” and cautioned that discussions about raising rates would be “highly premature.”

“Gold lost its mojo after the Fed’s latest economic projections showed the last call for stimulus was nearing,” said Edward Moya, a senior market analyst at Oanda Corp. “The Fed’s hawkish pivot is a major buzzkill for gold bulls that could see some momentum selling over the short term.”

Spot gold rose 0.3% to $1,816.85 at 8:56 a.m. in Singapore, after tumbling as much as 3% to $1,803.87 on Wednesday, the lowest intraday level since May 6. Silver, platinum and palladium all advanced. The Bloomberg Dollar Spot Index added 0.1% after rising 0.9% on Wednesday.

“Despite the recent weakness for gold over the past week, gold’s medium-and-longer term outlook remains bullish,” Moya added. “The line in the sand that needs to be defended for bullish bullion investors is the $1,800 level.”

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