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Sept. 19, 2019, 2:03 p.m. EDT

Gold logs first loss in 4 sessions after Fed delivers ‘hawkish cut’ to interest rates

Palladium scores another record settlement

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By Myra P. Saefong and William Watts, MarketWatch

AFP/Getty Images

Gold prices ended lower Thursday, marking their first loss in four sessions, a day after the Federal Reserve delivered a widely expected interest rate cut but left traders uncertain on the outlook for further monetary easing.

“As we expected, gold and to a lesser degree silver came under pressure following the ‘fact’ of the U.S. rate cut,” said analysts at Zaner Metals, in a daily report.

Fed policy makers on Wednesday afternoon cut the Fed’s benchmark rate by a quarter of a point, but the move saw three dissents — with two officials urging rates to remain unchanged and one calling for a larger cut.

“Adding to the downward pressure in gold prices is the take away that the Fed will not be quickly enticed into another reduction,” said analysts at Zaner.

Gold for December delivery  on Comex fell $9.60, or 0.6%, to settle at $1,506.20 an ounce, while December silver  lost 3.5 cents, or 0.2%, to $17.884 an ounce.

Fed Chairman Jerome Powell, in his news conference Wednesday, “did not explicitly commit himself to further rate cuts” and indicated the Fed would make its decisions from meeting to meeting based on data, leading the market to somewhat reduce expectations for further cuts, said Daniel Briesemann, analyst at Commerzbank.

The Fed’s lack of commitment to further monetary easing lent strength to the U.S. dollar, which rose versus most major rivals on Wednesday, putting some pressure on gold shortly after the Fed news. However, the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.09%  edged lower in Thursday dealings.

“The Fed is, without a doubt, a headwind at this juncture,” said Adam Koos, president of Libertas Wealth Management Group. “However, the [stock] market testing summer highs is putting a damper on the fear trade,” and haven demand for gold.

Meanwhile, yet another significant pressure on gold and other safe haven instruments is the realization that retaliation against Iran is apparently taking the form of fresh sanctions instead of military action,” said analysts at Zaner.

On Wednesday, U.S. President Donald Trump indicated sanctions would be announced soon so “in short, unless the Saudi government decides to launch a military strike unilaterally, a major safe haven event doesn’t appear to be likely in the coming days,” said analysts at Zaner.

In other metals trade, December copper  lost about half a cent, or 0.2%, to $2.6085 a pound. October platinum  rose $7.80, or 0.8%, to $942.40 an ounce.

December palladium  added $30.40, or 1.9%, to $1,612.60 an ounce, with prices reaching a fresh record, topping the previous record settlement of $1,604.80 from a week ago.

“Gas-powered cars continue to show growth in sales, and since the metal is used for the production of catalytic converters, we’re seeing higher demand, which is leading to higher prices,” said Libertas’ Koos. “For now, the correction in spring and pullback in summer are starting to look more like consolidation than anything, and as long as prices are above $1,600, I think it’s pretty difficult to be bearish.”

US : U.S.: ICE Futures U.S.
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May 29, 2020 5:58p

Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong. William Watts is MarketWatch's deputy markets editor, based in New York. Follow him on Twitter @wlwatts.

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