June 17, 2021
Gold inches higher after sharp sell off on hawkish Fed
(Reuters) - Gold prices rose on Thursday, recouping some of the losses made in the previous session after the U.S. Federal Reserve signalled it might raise interest rates sooner than expected.
Spot gold was up 0.5% at $1,820.34 per ounce. U.S. gold futures were down 2.1% to $1,822.
“Gold was crushed overnight by a more hawkish Fed. It has staged a modest recovery in Asia but the rally looks more like speculative dip buying and fast money short-covering, than a vote of confidence in the yellow metal,” said Jeffrey Halley, a senior market analyst at OANDA.
“The recovery in gold should be approached with caution as we have yet to see how a change in tone from the Fed will fully play out in markets. Gold’s daily close below $1,797.50 will signal a deeper correction is in prospect.”
Gold prices slipped more than 2.5% on Wednesday, hitting their lowest since May 6, after hawkish comments from Fed officials lifted the dollar to a two-month high, while U.S. Treasury yields jumped.
The Fed on Wednesday began closing the door on its pandemic-driven monetary policy with 11 out of 18 central bank officials projecting at least two quarter-point interest rate increases for 2023. .
Gold is seen as a hedge against inflation, but a rate hike by the Fed will increase the opportunity cost of holding bullion and dull its appeal.
“Bargain-hunting, safe-haven demand and buying the dips emerged as gold fell to $1,804, although the change in Fed’s script had benefited the dollar and Treasury yields rather than precious metals in the immediate term,” Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.
Spot gold may revisit its Wednesday low of $1,803.79 per ounce as suggested by its wave pattern, said Reuters technical analyst Wang Tao.
Silver gained 0.4% to $27.08 per ounce, while palladium dropped 1% to $2,769.98 and platinum eased 0.2% to $1,120.77.