Gold rose the most in two weeks after US Federal Reserve Chairman Jerome Powell said tapering might be appropriate this year, easing concern that policymakers would soon tighten monetary policy.
The central bank could begin reducing its monthly bond purchases this year, although it would not be in a hurry to begin raising interest rates thereafter, Powell said on Friday in a virtual speech at the Kansas City Fed’s annual Jackson Hole symposium.
NO MAJOR PURCHASING
US dollar and real Treasury yields sank as the Fed Chair spoke, allowing gold to increase past two of its main moving averages.
“Powell’s speech is slightly dovish but not dovish enough to jump start any large-scale buying in precious metals,” said Nicky Shiels, head of metals strategy at MKS (Switzerland) SA. “It was his strongest signal yet that the taper will begin this year [not next], and he didn’t fully capitalize on the risk of the Delta variant [of SARS-CoV-2] on policy.”
Powell’s much-anticipated speech eased prior concerns that the central bank would soon tighten monetary policy to combat inflation. A rapid increase in US prices linked to snarled supply chains and shortages had raised the prospect of an early reduction in stimulus, which has cast a shadow over the gold market this month.
The Fed Chair used his speech to reiterate his view that those pressures are temporary and confined to a narrow group of goods.
FLOUNDERING
Gold has stumbled much of this year as COVID-19 vaccine rollouts, better-than-expected recoveries in some economies and worries over rising interest rates dimmed its appeal.
Low rates helped power non-interest-bearing bullion to a record high last year on a wave of investor cash. This year, exchange-traded funds holding the metal have experienced outflows.
FUTURES
Gold for December delivery rose US$24.30 to US$1,819.50 an ounce, its highest since Aug. 4 and up 2.04 percent for the week.
Attention is now expected turn to data on the strength of the US labor market, which with inflation at target is likely to determine the timing of tapering. The next non-farm payrolls report is due in a week, with a repeat of the substantial out-performance seen this month almost certain to hurt gold.
Other commodities:
‧Silver for September delivery rose US$0.51 to US$24.06 an ounce, up 3.57 percent weekly, and September copper rose US$0.07 to US$4.32 a pound, rising 6.93 percent week-on-week.
‧Aluminum climbed to its highest price since 2018 as Chinese authorities ordered fresh output curbs to rein in energy usage. Aluminum rose 1.2 percent to US$2649.50 a tonne.
Additional reporting by AP
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