By Barani Krishnan
Investing.com - Gold prices were mixed on Wednesday, with futures down and spot metal up, after the Federal Reserve’s strong support for a new Covid-19 stimulus failed to excite haven buyers.
The yellow-metal crowd also didn’t show much enthusiasm for President Donald Trump’s second about-face in as many days on the stimulus. Trump dispatched Treasury Secretary Steven Mnuchin to revive talks with House Speaker Nancy Pelosi for a narrower, targeted deal that would help airline workers, among others. On Tuesday, Trump flatly refused to deal anymore with Pelosi, saying she and the Democrats were demanding a $2.4 trillion stimulus against the White House offer of $1.6 trillion.
"Gold is dusting itself off after President Trump flip-flopped on fiscal relief,” said Ed Moya, analyst at OANDA in New York. “Gold is stabilizing right now, and the path higher might take a while longer. Gold needs a stimulus catalyst and it seems unlikely that will happen before the election.”
U.S. gold for December delivery settled at $1,890.80 an ounce on New York’s Comex, down $18, or 0.9%, on the day. It fell 0.6% on Tuesday.
Spot gold, which reflects real-time trades in bullion, was up $7.79, or 0.4%, at $1,885.92 by 3:37 PM ET (19:37 GMT).
Most Federal Reserve bankers at their September meeting backed Congress in issuing a new coronavirus stimulus relief, saying without it economic recovery from the pandemic would likely drag further, minutes of the meeting released Wednesday showed.
“The staff's forecast assumed the enactment of some additional fiscal policy support this year; without that additional policy action, the pace of the economic recovery would likely be slower,” the minutes said. “In addition, the staff projection assumed that monetary policy would be even more accommodative than in the previous forecast in order to more fully reflect the revised consensus statement.”
The U.S. economy shrank at its fastest pace in history in the second quarter of 2020, contracting by 31.4% amid widespread lockdowns triggered by Covid-19. While economic data has been encouraging in recent months, recovery from the pandemic itself has remained spotty.
On the labor front, more than 21 million jobs were lost for all of March and April, at the height of lockdowns forced by Covid-19. The labor market posted a strong rebound of 2.5 million jobs in May and 4.8 million in June, before the recovery began slowing.
The Fed said although real gross domestic product growth was projected to exceed potential output growth, the unemployment rate was expected to decline considerably further, and inflation was forecast to pick back up in 2021 through 2023.
“In addition, the staff projection assumed that monetary policy would be even more accommodative than in the previous forecast in order to more fully reflect the revised consensus statement.”
Congress passed four packages of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in the second quarter of this year, dispensing roughly $3 trillion to disburse as loans and grants to businesses, paycheck protection for workers and personal aid to qualifying U.S. citizens and residents.
The White House and its Democrat rivals in Congress have been locked in a stalemate since on a successive package to the CARES, arguing over the size of the next relief as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid.
Trump, who stands for reelection in November, has accused House Speaker and Democrat leader Pelosi of playing political football over the issue. Pelosi says any stimulus deal reached should be for the advantage of all Americans — not Trump’s political expediency.