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Metals Stocks: Gold ends with a slight gain, eases back after Federal Reserve policy statement and Powell comments

Gold futures finished with a slight gain on Wednesday, climbing even further in electronic trading after Federal Reserve’s policy statement, but prices then eased back as investors weighed comments from the central bank’s Chairman Jerome Powell.

Fed officials suggested that the central bank may soon decide to taper its bond purchases and raise interest rates by late next year.

Shortly after gold futures settled for the session, the Fed said that “if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted.”

Also, in updated projections, the central bank penciled in three rate hikes in 2023 and three more in 2024, bringing the benchmark interest rate up to 1.8% by the end of the period.

The Fed indicated they would keep rate hikes on schedule, with at least three hikes to occur in 2023, Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund

told MarketWatch.

Investors were looking for signs that the fiscal health of China’s highly levered property developer Evergrande

is giving the central bank any cause for concern about knock-on effects in the U.S. and elsewhere.

“There have been some concerns about financial contagion out of China that the Fed could possibly have attempted to ameliorate,” Teed said. “As such, rates were expected to remain low for the foreseeable future, despite indications of economic recovery, and transitory inflation.”

Still, it appears the Fed is “not overly concerned about such contagion, and verbiage within their statement appeared a bit stronger in suggesting both rate hikes and decreasing monetary support,” said Teed, who’s also director of research at Flexible Plan Investments Ltd. “Rate hikes from the Fed tend to create a headwind for gold prices.”

In electronic trading shortly after the Fed announcement, December gold


traded at $1,786 an ounce. The contract had settled at $1,778.80 an ounce, up 60 cents, or 0.03%, for the session.

Following comments from Powell at a news conference Wednesday afternoon, however, prices for gold then eased back to $1,769.20.

Read: With Fed officials split over outlook, Powell seeks to find compromise tapering plan

While the central bank’s newly released economic forecast for the next few years show the Fed lifting U.S. interest rates next year by a quarter-point , Powell, at the press conference, stressed that “these projections do not represent a committee decision or plan and no one knows with any certainty where the economy will be in a year or more from now.”

See: Fed could fracture in 2022 over when to raise interest rates, economist says

“Despite an initial positive reaction to the Fed policy statement, further consideration, along with…Powell’s statements in his press conference, led investors to take a less bullish view,” said Brien Lundin, editor of Gold Newsletter, and gold sold off.

Still, Lundin told MarketWatch he believes the actual initiation of “QE tapering could be a launching pad for gold, much as the Fed’s initial rate hike in December 2015 ended gold’s long bear market.”

The “actual removal of accommodation seems to also remove selling pressure on gold from speculators betting on that event,” he said.

In other metals-related news Wednesday, the Bank of Japan confirmed that it would stick to an ultraeasy monetary policy as it wrestles with COVID-19 outbreaks caused by the delta variant.

Rounding out metals action on Comex, December silver SIZ21 SI00 ended Wednesday up 1.3% at $22.91 an ounce, extending a 1.8% rise from the previous session. December copper

climbed nearly 3.1% to $4.25 a pound.

October platinum

rose 5.3% to $1,001.10 an ounce and December palladium

settled at $2,036.20 an ounce, up 7.5% Wednesday. The notable gains for both metals follow two straight weeks of declines, FactSet data show.

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