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Gold Records Worst Monthly Loss in Five Years on Fed ‘Taper-Tantrum’

Commodities Jun 30, 2021 04:09PM ET
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© Reuters.

By Barani Krishnan

Investing.com - Gold suffered its worst monthly loss in almost five years as bulls in the yellow metal were buffeted by incessant speculation of stimulus tapering and rate hikes by the U.S. central bank — despite neither of that looking likely to happen anytime soon.

Front-month gold futures on New York’s Comex settled Wednesday’s trade at $1,771.60, up $8, or 0.5% on the day. For the month though, it plunged almost $135, or 7%, its most since a 7.2% drop in November 2016.

For the quarter, Comex gold’s loss was less though still substantial — at around $45 or almost 3%.

Conviction has become a rare commodity in gold as the average long investor tried to stay true to the yellow metal through its travails of the past six months.

Since January, gold has been on a tough ride that actually began in August last year, when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in COVID-19 vaccine efficiencies were announced. At one point, gold raked a near 11-month bottom at under $1,674.

After appearing to break that dark spell with a bounce back to $1,905 in May, gold saw a new round of short-selling that took it back to $1,800 levels before talk of monetary tightening by the Federal Reserve sent it to a two-month low of around $1,750 this week.

For the record, the Fed has indicated that it expects two hikes before 2023 that will bring interest rates to 0.6% from a current pandemic-era super-low of zero to 0.25%. It has not set a timetable for the tapering or complete freeze of the $120 billion in bonds and other assets it has been buying since March 2020 to support the economy through the Covid crisis.

That has, however, not stopped senior bankers on the central bank’s all-important FOMC, or Federal Open Market Committee, from commenting on the likelihood of a taper or rate hike in their public speeches. And talk they have, day after after, week after week since the FOMC’s meeting for June.

Typically, each hawkish speech on a taper or rate hike ends up hammering gold more than a dovish comment would lift it.

Also, amazingly lost in the whole transition is gold’s position as a hedge against inflation. The Fed’s preferred inflation gauge, the Personal Consumption Expenditure Index, grew by a multi-year high of 3.4 percent in the 12 months to May. The more popular Consumer Price Index, meanwhile, jumped 5% in the year to May, its most since 2008.

Most commodity prices, from oil to grains such as soybeans, corn and wheat, are also at multi-year highs.

But gold continues to fall, while the Dollar Index and U.S. 10-year bond yields have periodically risen, often on inane Wall Street talk and research about taper and rate hikes, despite trillions of dollars of government spending since the outbreak of the pandemic.

Gold Records Worst Monthly Loss in Five Years on Fed ‘Taper-Tantrum’
 

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Comments (8)
Todd Holaday
JustWilliam Jun 30, 2021 9:51PM ET
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Misprint i think. Should be up $8 today, not down.
Barani Krishnan
Barani Krishnan Jun 30, 2021 9:51PM ET
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Hi, yes, misprint indeed. Glazed over my eye. Thanks for catching. I have fixed. Bests.
abubakar Hassan
abubakar Hassan Jun 30, 2021 7:23PM ET
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okay
Joel Schwartz
Joel Schwartz Jun 30, 2021 7:15PM ET
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Goldman Sachs and JP Morgan were fined for manipulating US securities and precious metals markets. $120M…which is why they kept doing it still to this day. Until the fines are greater than the profits or have lasting negative effects on the people who commit fraud, nothing will change. Long $JDST.
Jouni Matero
Jouni Jun 30, 2021 7:15PM ET
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Yet a lot of ppl stick to illusion market is not manipulated by big banks, FED and other MM. Wake up people.
Jouni Matero
Jouni Jun 30, 2021 7:15PM ET
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Is it because of this manipulation why gold has gone down while people expected it should go up?
Joel Schwartz
Joel Schwartz Jun 30, 2021 7:15PM ET
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Jouni Matero Yep. It’s why precious metals barely move up as the dollar’s value goes down but collapse the moment it begins to go up. Stealing from retail.
Jouni Matero
Jouni Jun 30, 2021 7:15PM ET
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Sounds like same is going on with NQ100 but reverse. No matter how bad news comes out, index first drops heavily as it should but in an hour it's back there and in closing it's higher. And every day same time sudden rises with big volumes.
Doug Wildman
Doug Wildman Jun 30, 2021 6:50PM ET
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A week ago today, Janet Yellen urged Congress to increase or eliminate the debt ceiling…to avoid catastrophic default. Why no reaction by the markets to this?
Andrew Allen
Andrew Allen Jun 30, 2021 6:50PM ET
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because everyone knows congress will increase or eliminate the debt ceiling just like they always have since they created it.
Joel Schwartz
Joel Schwartz Jun 30, 2021 6:50PM ET
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Andrew Allen If they eliminate the debt ceiling, the USD deserves to lose reserve currency status. It means we can never repay our debts.
Eugen Simandel
Eugen Simandel Jun 30, 2021 5:16PM ET
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Everybody can see almost daily manipulation with gold/silver commodity in charts. Huge drops on daily basis based on manipulated gold futures contracts financed by FED to keep dolar strong. Nothing like free market in US anymore.  If gold is so "poor" commodity, why are Chinese buing it all? It is just matter of time and gold will sky rocket.
Maks Mars
Maks Mars Jun 30, 2021 5:16PM ET
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No need for silver and gold in a modern world
NUNO LOUREIRO
NUNO LOUREIRO Jun 30, 2021 4:43PM ET
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Why this "taper-tantrum" is not affecting the stock market??
Jouni Matero
Jouni Jun 30, 2021 4:43PM ET
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Because it's manipulated ponzi scheme by big boys.
Michael Dell
Michael Dell Jun 30, 2021 4:37PM ET
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Speculators are setting prices instead of real buyers and sellers on the ground at this time
Dave Jones
Dave Jones Jun 30, 2021 4:31PM ET
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should be worst loss on fraud and manipulation... that's the truth isn't it Barani?
Barani Krishnan
Barani Krishnan Jun 30, 2021 4:31PM ET
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As you see it, Dave.
 
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