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Gold prices settle lower, then climb after Fed shifts away from ‘patient’ stance on rates

Thu June 20 2019


Gold prices settled lower Wednesday, easing back from the previous day’s settlement at their highest in 14 months, then climbed after the U.S. Federal Reserve left key interest rates unchanged, but shifted away from its “patient” stands on rates.


In a statement that followed the gold futures’ settlement, the Fed held benchmark interest rates steady between 2.25%-2.50%. However, officials also said that over the last six weeks, “uncertainties” have increased about the outlook and they shifted away from their prior patient stance.


Fed officials appear sharply divided about whether the Fed will cut interest rates this year, judging from the central bank’s projections of future interest rate moves, known as the “dot plot.”


“The Fed provided clear evidence of a short fuse to ease this year,” said strategists at TD Securities after the news, noting that nine officials, in total, see at least one rate cut by the end of 2020. Precious metals tend to draw buying in a low interest-rate climate.


In electronic trading, August gold GCQ19, +2.65% was at $1,354.20 an ounce shortly after the Fed announcement. The contract had declined by $1.90, or 0.1%, to settle at $1,348.80 an ounce. On Tuesday, prices notched the highest most-active contract settlement since April 18, 2018, according to FactSet data.


After the Fed news, yields for benchmark debt were moving lower, with the yield for the 10-year Treasury note TMUBMUSD10Y, -2.04%  at 2.05%, which can make government debt less appealing to buyers seeking haven assets compared against bullion.


Prices for gold still trade higher for the week as well as the month so far because investors have bought so-called haven assets against a backdrop of uncertainty about the resolution of the import tariff dispute between China and the U.S. and fears that the global economy is weakening. On Tuesday, European Central Bank President Mario Draghi suggested that the ECB could introduce more stimulus if the eurozone economy weakens further.


In other metals dealings, July silver SIN19, +1.99%  shed 3.5 cents, or 0.2%, at $14.958 an ounce, after the precious metal climbed 1.1% on Tuesday, while July copper HGN19, +1.12% slipped by 2.3 cents, or 0.8%, to $2.681 a pound, after a 2.1% gain the day before.


July platinum PLN19, +1.20%  rose 0.5% to $805.80 an ounce and September palladium PAU19, +0.38%  settled at $1,492.60 an ounce, up 1.3%.


The SPDR Gold Shares exchange-traded fund GLD, +0.61%  inched higher by 0.4%.