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Gold Hits One-Month Low Under $1,850 as Fed Taper Talk Gains Steam

Published 06/14/2021, 09:31 AM
Updated 06/14/2021, 05:05 PM
© Reuters.

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By Barani Krishnan

Investing.com - Gold closed at its lowest in a month after plumbing a bottom beneath $1,850 an ounce on Monday as speculators shorted the yellow metal on rising conviction that the Federal Reserve would indicate at its policy meeting this week some kind of timetable for the tapering of its asset purchases to support the U.S. economy.

Front-month gold futures on New York’s Comex settled at $1,865.90, down $13.70, or 0.7% on the day. That was the lowest close for an ounce of Comex gold since May 20. Earlier in the session, the front-month contract fell to as low as $1,846.20, a bottom not seen since May 16.

The drop came after a third straight weekly loss for gold that has shaved as much as $40, or more than 2%, off Comex gold since the week ended May 21.

The spot price of gold, reflective of real-time trades in bullion, was down $11.57, or 0.6%, at $1,866.15 by 5:00 PM ET (2100 GMT). Spot gold hit a  bottom of $1,844.95 earlier.

Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of futures.

The 10-year yield on U.S. Treasuries rose midway through the session and the Dollar Index was down throughout the day, taking some credence away from the taper talk.

The Federal Reserve has repeatedly said that near-term price spikes will not translate into lasting inflation, and Chairman Jerome Powell is expected to stick to this stance and reassure markets the Fed’s policy will remain accommodative.

Most analysts are not expecting the central bank to begin discussing scaling back its asset purchase program before its annual conference in Jackson Hole, Wyoming, in late August.

Even so, investors will be zeroing in on the Fed's statement on Wednesday at the conclusion of its two-day policy meeting for June, held against a backdrop of persistent concerns over inflation spikes and whether these could prompt the central bank to pull back its monthly asset purchases faster than thought.

At stake is $80 billion in Treasury bonds and $40 billion in mortgage bonds that the Fed has been buying since the Covid-19 outbreak last year. A bigger decision for the Fed will be when to hike interest rates, which have been at zero and 0.25% for more than a year as the United States wrestled with the pandemic.

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