By Myra P. Saefong and Mark DeCambre
Gold futures fell on Thursday, with prices marking their lowest finish in more than six weeks, as investors gravitated toward equities and away from assets perceived as havens.
The loss is “related to a combination of factors centered around investor confidence improving and fear easing,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
So far, China property giant Evergrande’s (HKG:HK:3333) problems have been contained, the Federal Reserve is moving toward tapering and at the Bank of England’s monetary policy committee vote, there were two “hawkish dissenters” calling for reducing stimulus as well, he told MarketWatch. “A more hawkish trend for central banks improves the value of paper money relative to hard currency like gold.”
December gold (NYM:GCZ21) (NYM:GC00) fell $29, or 1.6%, to settle at $1,749.80 an ounce. The most-active contract suffered its worst one-day dollar and percentage loss since Sept. 16 and saw the lowest finish since Aug. 10, FactSet data show. Prices gained less than 0.1% on Wednesday. December silver (NYM:SIZ21) (NYM:SI00) also fell 23 cents, or 1%, to $22.68 an ounce, following a 1.3% gain on Wednesday.
The Federal Reserve on Wednesday signaled its intent to “soon” taper its bond purchases and raise interest rates by late next year, which could dim appetite for bullion if investors shift to assets that offer yields.
Specifically, the Fed said “if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted.”
The announcement “put the Fed on a more hawkish path, with its intentions turning in favor of tapering beginning November,” to be completed by June next year, and with sentiment strongly leaning toward at least one 25 basis point rate hike in 2022 and at least two or more rate increases in 2023, said Jeff Klearman, portfolio manager at GraniteShares, which offers the GraniteShares Gold Trust (PSE:BAR) .
“The tilt away from easy money comes as the Fed’s ‘transitory’ inflation view shifts with growing concerns of higher, lasting baseline inflation,” he told MarketWatch.
Meanwhile, “Fed Chairman Powell at his press conference sounded upbeat on U.S. economic and jobs-growth prospects,” wrote Jim Wyckoff, senior analyst at Kitco.com, referring to Powell’s press conference on Wednesday.
“Judging by the positive reactions of stock and financial markets, the Fed meeting’s results, while not leaning dovish, were not too hawkish on U.S. monetary policy,” he wrote.
Still, real interest rates remain at historical lows, and it “does not seem likely they will be above zero any time soon,” Klearman said. “The market, at this point, believes the current, extremely low real-and nominal-rate environment will persist at least for the near future.”
That, combined with “fear of falling asset/equity levels, further fallout from Evergrande contagion, potentially spiraling inflation, historically high and growing U.S. deficits/debt levels and continued European Central Bank and Bank of England easy-money policies” are likely to provide solid support for gold prices,” said Klearman.
In U.S. economic news, U.S. weekly initial jobless benefit claims rose to 351,000 from 335,000 in week ended Sept. 18, but continuing state jobless claims increased 131,000 to 2.71 million. Separately, the IHS Markit flash U.S. manufacturing index fell to 60.5 in September from a previous reading of 61.1.
In other metals trading, December copper (NYM:HGZ21) lost 0.5% to $4.23 a pound. October platinum lost 0.4% to $997 an ounce and December palladium (NYM:PAZ21) settled at $1,971.80 an ounce, down 3.2%.