(Bloomberg) — Gold pared gains after Federal Reserve Chair Jerome Powell downplayed the likelihood of a December interest-rate cut.
“A further reduction in the policy rate at our December meeting is not a foregone conclusion — far from it. Policy is not on a preset course,” Powell said at a press conference after policymakers delivered a widely-expected quarter-point rate reduction on Wednesday.
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Bond yields and the dollar climbed, with bullion giving some of its earlier advances. Higher rates are typically negative for the non-yielding precious metal.
Gold has retreated sharply in recent days following a torrid rally that drove prices to a record above $4,380 an ounce last week. Technical indicators had shown the ascent had run too far, too fast — a move that coincided with reduced demand for havens amid signs of progress in US-China trade relations.
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Even after gold’s recent pullback, the metal is still up more than 50% this year, supported by central-bank buying and the so-called debasement trade, in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits.
The surge had drawn institutional and retail buyers to gold-backed exchange-traded funds — although outflows this week have dented some of that support. Total gold ETF holdings fell for a fifth consecutive day on Tuesday, according to data compiled by Bloomberg.
“Gold’s role as a portfolio hedge against fiscal and policy uncertainty remains undiminished, though short-term exuberance has clearly given way to consolidation,” said Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. “If we manage to consolidate in this range of $3,920-$4,020 an ounce, then it may set the stage for base-building before the next leg higher.”
Spot gold rose to $ an ounce as of in New York. Silver, platinum and palladium all advanced.
–With assistance from Preeti Soni and Sybilla Gross.