By Barani Krishnan
Investing.com - So much for gold longs counting on the Fed.
Any illusions that the Federal Reserve and its Chairman Jerome Powell would bestow the return of gold to $1,300 an ounce vanished as the precious metal plumbed four-month lows on Thursday. The central bank hit hopes of a near-term rate cut that would have been supportive to non-interest bearing bullion.
Spot gold, reflective of trades in bullion, was down $5.21, or 0.4%, at $1,271.53 per ounce by 2:15 PM ET (18:15 GMT). It earlier reached $1,266.35, its lowest level since Dec. 27.
Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $12.20, or 1%, at $1,272 per ounce. It was Comex gold's biggest one-day percentage decline in more than two weeks.
The Federal Open Market Committee, the Fed's interest-rate-making body, kept the benchmark interest rate unchanged on Wednesday, in line with the market’s expectations.
Even so, market participants were surprised by the central bank's emphasis that it saw no compelling reason to consider a rate cut any time soon, citing rising employment and economic growth. That put Powell on a collision course with President Donald Trump, who's been imploring the central bank for a rate cut that would help the economic recovery and further fuel stock market gains.
The dollar index, which measures the greenback against a basket of six currencies, was up 0.2% at 97.55. The dollar's rally makes gold costlier for investors holding other currencies. The gauge for the greenback tumbled to a more-than-one-week low of 96.99 on Wednesday on worries that the Fed might turn super dovish in its outlook under pressure from Trump.
"Not only has the U.S. dollar resumed its bullish trend following the FOMC meeting last night, but the price of crude has been falling in recent days," Fawad Razaqzada, analyst at FOREX.com, said, referring to a broad non-inflationary sentiment across commodities, including gold.
"It looks like the dollar bears were were positioned for a more dovish FOMC statement yesterday than the one they got," Razaqzada said. "Apparently, they have been forced to cover their dollar short positions, as the implied odds of a 2019 rate cut are now down near 50% from around 75% it reached at one point yesterday."
Elsewhere in metals, palladium rose, maintaining its volatile trend since Tuesday's shocking's 7% tumble on renewed worries that a supply squeeze in the auto-catalyst metal was more hype than fact.
Spot palladium was up $6, or 0.4%, at $1,357.25 an ounce.
Trades in other Comex metals as of 2:15 PM ET (18:15 GMT):
Palladium futures up $3.30, or 0.3%, at $1,347.70 per ounce.
Platinum futures down $22.90, or 2.6%, at $854.50 per ounce.
Silver futures down 9 cents, or 0.6%, at $14.64 per ounce.
Copper futures down 2 cents, or 0.6%, at $2.79 per pound.