Economic news

Gold Falls, on Brink of Halting Longest Win Streak

Gold prices headed lower on Thursday, with bullion threatening to snap a five-session streak of gains — the longest stretch so far this year — a day after minutes from the Federal Reserve’s April meeting suggested that the central bank is contemplating when it will begin scaling back monetary-policy support for the economy.

Gold began to move lower in electronic trade Wednesday after minutes from the Federal Reserve’s April meeting, released after gold futures settled, showed that members of the Federal Open Market Committee agreed that any price increases from bottlenecks are likely to only have “transitory effects” on inflation.

The minutes also implied, however, that the FOMC may be moving toward discussing a pathway toward rolling back some of its pandemic-era accommodations as the economy rebounds from COVID-19.

“Investors took big steps over the past few days toward recognizing gold’s traditional role as the pre-eminent hedge against inflation and currency depreciation,” said Brien Lundin, editor of Gold Newsletter.

“The next stop, still untaken, will be to recognize that, yes, Fed rate hikes are coming, but when they come, they’ll remain far behind the rate of inflation, because they have to be,” he told MarketWatch shortly after the release of the Fed minutes.

“As that understanding takes hold, investors will find gold remains the best way to protect their assets against the higher rates of inflation,” said Lundin.

June gold fell $4, or 0.2%, to $1,877.50 an ounce, following a 0.7% gain on Wednesday, which extended the most active contract’s climb to its highest finish since early January, FactSet data show. A Thursday decline for bullion would end the longest win streak since a similar stretch ended Jan. 5.

“A number of participants suggested that if the economy continued to
make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of
asset purchases,” the Fed minutes, released Wednesday, said.

However, the “pace of asset purchases had to end at some point and there is still no timetable or real target,” said Jeff Wright, chief investment officer at Wolfpack Capital, late Wednesday. So that was more “just a quick take, not a policy shift.” 

On Thursday, economic data offered a mixed picture of the COVID recovery phase.

A reading on U.S. unemployment benefits continued to decline to a pandemic low in mid-May as companies ramp up hiring efforts. Initial jobless claims fell 34,000 to 444,000 in the week ended May 15. Economists surveyed by Dow Jones and The Wall Street Journal had forecast new claims to fall to a seasonally adjusted 452,000.

Meanwhile, a reading of manufacturing activity in the Philadelphia area, the Philly Fed factory index, fell to 31.5 in May from a 50-year high of 50.2 in April.

Against that backdrop, copper futures were on track to notch back-to-back declines, with the July contract down 0.3% at $4.56 a pound after a more than 3% loss Wednesday.

July platinum tacked on 0.5% to $1,207.40 an ounce, but June palladium fell nearly 1% to $2,857.50 an ounce. the September palladium contract which is also among the most active, lost 0.9% to $2,866 an ounce.

Source: Marketwatch

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