Gold Flat on Week But Deeply Bruised After Fed Taper Plan

imageCommodities31 minutes ago (Sep 24, 2021 02:36PM ET)

(C) Reuters.

By Barani Krishnan – For the record, it ended flat on the week. Yet, gold wouldn’t fool anyone on what prompt sentiment is for the yellow metal.

U.S. gold futures’ most active contract, December, settled down $1.90, or 0.1%, at $1,751.70 per ounce on New York’s Comex.

For the week though, it was virtually flat, in fact settling 30 cents higher from last Friday.

But to those tracking the market, especially the long investors who have repeatedly been burned following optimistic forecasts of the past nine months, the real weekly comparison should have been against last Wednesday.

That was the day when gold lost 2%, its most since early August, as U.S. bond yields spiked and the dollar girded higher as well on speculation of hawkish Federal Reserve action over its economic stimulus and lower-for-longer interest rates.

“Gold has been battling against a stronger dollar that stemmed from surging Treasury yields post-Fed,” said Ed Moya, analyst at online trading platform OANDA.

“Gold is in a very tough spot and volatility will remain elevated with the risks remaining to the downside. The U.S. growth story will continue to improve if COVID modelers are right about a steady decline in COVID cases through March.”

Moya added that gold longs could be in further trouble if Chinese property giant Evergrande, which rocked markets this week with its growing debt crisis, managed to avert a contagion. “If the Evergrande fallout is contained over the weekend, gold could be vulnerable for a test of the $1,700 level.”

Fed Chair Jay Powell, at the conclusion of the central bank’s monthly policy meeting on Wednesday, repeated his mantra that inflation was trending above the Fed’s target of 2% per annum due to the higher costs of doing business in a pandemic-constrained economy.

The market has consistently shown that it has little faith in the Fed to be able restrain inflation and sent bond yields to multiple-year highs since the end of 2020 to reflect that. Gold, a non-yielding asset branded as a safe haven, has been the principal victim of yield hikes.

Gold Flat on Week But Deeply Bruised After Fed Taper Plan

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