Gold slipped to a two-week low on Wednesday as strength in the dollar and higher U.S. Treasury yields outweighed the boost to bullion from deepening concerns about global economic growth.
· Spot gold was down 0.1% at $1,792.27 per ounce by 1:49 pm EDT, having dropped to $1,781.30, its lowest since Aug. 26.
· U.S. gold futures settled down 0.3% at $1,793.5.
· “It’s frustrating to gold market bulls that even though there’s some keener risk aversion in the marketplace this week, the gold market sold off,” said Jim Wyckoff, senior analyst at Kitco Metals.
· Worries about a Delta variant-driven slowdown in economic growth have shaken equities this week, but flows into gold have been limited by firmer bond yields and a rise in the dollar that has made bullion costlier for holders of other currencies.
· “Gold’s limited gains in 2021 despite low rates and high inflation prints does not bode well for its prospects and we see gold prices to average $1,750 on average in 2022 as investment flows drop further,” Societe Generale said in a note.
· New York Fed Bank President John Williams on Wednesday said that it may be appropriate for the Federal Reserve to start reducing the pace of its asset purchases later this year if the U.S. economy continues to improve.
· Investors also eye a European Central Bank meeting on Thursday for hints on whether it may roll back economic support.
· Non-yielding gold tends to gain in a low interest-rate environment, while some investors also view the metal as a hedge against higher inflation that could follow stimulus measures.
· Elsewhere, silver fell 1.2% to $24.02 per ounce, platinum dropped 1.7% to $981.77 and palladium shed 4.8% to $2,259.23.
· Businesses are feeling stronger inflation and paying higher wages, Fed’s ‘Beige Book’ says
U.S. businesses are experiencing escalating inflation that is being aggravated by a shortage of goods and likely will be passed onto consumers in many areas, the Federal Reserve reported Wednesday.
In its periodic “Beige Book” look at the nation’s economic picture, the central bank also reported that growth overall had “downshifted slightly to a moderate pace” amid rising public health concerns during the July-through-August period that the report covers.
“The deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions,” the report said.
Rising inflation pressures are part of that picture in which a shortage of workers is being met by higher salaries.
· Fed officials say tapering could still get started this year
Several Federal Reserve policymakers on Wednesday signaled that the U.S. central bank remains on track to trimming its massive asset purchases this year, despite the slowdown in jobs growth seen in August and the impact of the recent COVID-19 resurgence.
- Fed's Bullard says stimulus tapering should begin this year
- Fed's Kaplan downgrades 2021 GDP forecast, sticks to taper call
- NY Fed's Williams says decision on tapering is not indicative of rates liftoff
· Fed officials will meet again in two weeks on Sept. 21 and 22.
· Inflation could prompt ECB to tighten policy quicker, Holzmann says
The European Central Bank could tighten policy sooner than many expect as inflationary pressures could prove to be persistent, ECB policymaker Robert Holzmann said in a contribution to Eurofi Magazine on Wednesday.
· ECB to kick off its tapering debate as inflation surges to a 10-year high
Market participants are keenly watching the European Central Bank this week as the Frankfurt institution meets to discuss its pandemic-era stimulus amid soaring inflation and solid economic growth.
· ECB may dial back support but won't take it away just yet
The European Central Bank is expected to claw back stimulus on Thursday, taking a token step towards unwinding the emergency economic aid it put in place during the pandemic while still signalling copious support for years to come.
· BoE split evenly in August on whether basic conditions for rate hike met - Bailey
Bank of England policymakers were split evenly last month between those who felt the minimum conditions for considering an interest rate hike had been met and those who thought the recovery was not strong enough, Governor Andrew Bailey said.
· China’s central bank keeps the brakes on economic stimulus
China’s central bank policymakers pushed back Tuesday on expectations they would take aggressive measures to boost economic growth.
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