Gold tumbles to one-week low amid Fed ambiguity

Bengaluru — Gold on Thursday fell to its lowest in a little over one week, after comments from US Federal Reserve chair Jerome Powell dashed hopes of a near-term rate cut, boosting the dollar and treasury yields. 

Spot gold shed 0.2% to $1,274.50/oz as of 4.03am GMT, having fallen to $1,272.14, its lowest since April 24, earlier in the session.

US gold futures fell 0.7% to $1,275.70/oz.

The Fed held interest rates steady on Wednesday, but emphasised on the rhetoric that it does not see a readjustment of rates in the near term.

“We know that the Fed is going to be on pause for a while, but the market was pricing in a more dovish lean towards the end of 2019,” said Stephen Innes, head of trading and market strategy at SPI Asset Management.

Powell’s view on inflation revived an ailing dollar on Wednesday and also prompted US Treasury yields higher.

A higher interest rate increases the opportunity cost of holding non-yielding gold and pushes up the dollar and yields, leading to an inverse impact on the price of gold.

“There is a little bit of ambiguity around [Powell’s] inflation language in particular. He sounded almost like Janet Yellen back in 2016 when he said that inflation risk could be transitory … So that really means the Fed is probably going to be stuck in neutral,” Innes added.

Meanwhile, Asian shares also adopted a wait-and-watch approach with major centres Japan and China shut for holidays.

Source: businesslive.co.za