Gold crawls higher as Fed reiterates economic woes

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August 20, 2020

Gold inched up on Thursday, regaining ground from a more than 3% slide the previous session after the U.S. Federal Reserve minutes highlighted the uncertainties surrounding economic recovery from a pandemic-induced slump and dented risk appetite.

Minutes from the U.S. central bank’s last policy meeting showed policymakers were concerned the economy faced a highly uncertain path and more monetary support may be needed.

But policymakers downplayed the need for yield caps and targets.

Spot gold rose 0.1% to $1,931.76 per ounce by 1114 GMT. U.S. gold futures fell 1.6% to $1,938.50.

“The belief is still that the Fed is most certainly not going to allow interest rates to rise at this point in time and that some kind of control cannot be ruled out,” said Saxo Bank analyst Ole Hansen, adding, the market still sees dips as a buying opportunity.

“The direction of the dollar and bond yields will continue to set the agenda.”

The Fed’s economic view prompted a wave of selling in global equity markets.

Capping gold’s gains, the dollar index was up 0.2% against rival currencies, rebounding from an over two-year low. A higher dollar makes gold expensive for holders of other currencies.

“The main fundamentals behind gold have not changed,” said Edward Meir, an analyst at ED&F Man Capital Markets.

“Stimulus is still coming in and it’s very pre-mature to say we’re recovering globally and should see higher rates and stronger dollar; we are many months away from that.”

Central banks have rolled out massive stimulus and cut interest rates to near zero to combat the economic toll from the new coronavirus crisis, prompting over 27% gains for the year in gold, considered a hedge against inflation and currency debasement.

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Elsewhere, silver gained 0.8% to $26.94 per ounce, platinum dipped 0.4% to $928.38, and palladium inched up 0.1% to $2,159.12.

Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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Gold crawls higher as Fed reiterates economic woes

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