Gold falls and yields gain after Fed comments

New York — Gold fell in volatile trading on Thursday as the US dollar and Treasury yields rose after Federal Reserve chair Jerome Powell shifted the central bank’s inflation target in a widely expected move.

Spot gold fell 1.72% to $1,921.10/oz after midday in New York. Prices had risen as much as 1.1% during Powell’s speech. US gold futures were down 1.4% at $1,924.60/oz.

The Fed saying it will allow modest overshoot in inflation is very positive for gold, said Daniel Ghali, commodity strategist at TD Securities, “But the market already anticipated that so there is no new impetus to buy gold.”

The US central bank rolled out an aggressive new strategy to lift employment and will seek to achieve inflation averaging 2% over time, offsetting below-2% periods with higher inflation “for some time.”

Weighing on bullion, the US dollar gained against key rivals, while longer-term US Treasury yields moved to their highest levels in months.

“Powell’s speech sparked a roller-coaster ride for asset markets especially gold, which rallied nearly $50 but completely reversed as market realised he didn’t provide any surprises that hadn’t been mooted earlier,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

The Fed had pumped in massive stimulus and kept interest rates near zero to lift the US economy from the impact of the coronavirus, which has also weighed on the labour market as new claims for unemployment hovered near 1-million last week.

Elsewhere, silver fell over 3% from a one-week high earlier in the session. The metal was down 2.1% at $26.95.

Spot palladium was down 1.4% to $2,166.33 per ounce and platinum fell 1.1% to $918.54.