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

© Reuters.

By Barani Krishnan – Gold hit one-month lows 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.

on New York’s Comex was down $29, or 1.5%, at $1,850.60 per ounce by 9:22 AM ET (13:22 GMT). The session bottom was $1,846.20, a low since May 16.

The drop also came after a third straight weekly loss for gold that has shaved as much as $55, or nearly 3%, of Comex gold since the week ended May 21.

The gold, reflective of real-time trades in bullion, was down $28.49, or 1.5%, at $1,849.23, touching a session bottom at $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.

Notwithstanding the sell-off in gold, the and the were both down, 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 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.

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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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