Gold steadied near the highest level in more than four months as investors assessed the minutes from the Federal Reserve’s April meeting that flagged the possibility of a debate on scaling back asset purchases.
“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” according to minutes published Wednesday. Treasury yields and the dollar rose after the release. In a press conference following last month’s meeting, Chair Jerome Powell had said that it was premature to start talking about tapering.
Rising inflation expectations and the Fed’s pledge to keep rates low for longer has revived interest in gold, with a rebound seen in holdings in bullion-backed exchange-traded funds. While U.S. policy makers have signaled they intend to maintain an accommodative stance for a prolonged period, any hints of a timeline for paring back exceptional stimulus could weigh on the precious metal.
“With the Fed apparently inching toward talking about tapering, 10-year Treasury yields rallied on Wednesday, pushing gold lower,” said Nicholas Frappell, global general manager at Sydney-based ABC Bullion. “Still, gold appears to have recovered short-term bullish momentum after the dip despite weak physical demand and a slight bounce in the Dollar Index.”
Spot gold rose 0.2% to $1,873.83 an ounce by 9:28 a.m. in London. Prices climbed to as much as $1,890.13 on Wednesday, the highest since Jan. 8, but erased gains after the release of the Fed minutes. Silver, palladium and platinum advanced. The Bloomberg Dollar Spot Index edged lower after climbing 0.5% on Wednesday.
The extreme price swings in cryptocurrencies on Wednesday may have also helped support bullion. The inherently limited supply of Bitcoin has seen it touted as a replacement for gold, particularly during the metal’s torrid start to the year.
“It appears as though the recent weakness in Bitcoin is seeing some investors shifting to gold,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore.
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Gold Near Four-Month High as Fed Signals Taper Talk Is Coming - Bloomberg
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