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Gold slips as Fed policy moves whet risk appetite

Brijesh Patel/Bengaluru
Filed on July 30, 2020
Gold jumped on Wednesday after the Fed pledged to keep interest rates near zero as the rapid rise in coronavirus cases dampened hopes for an economic recovery. - Reuters

Gold up more than 28% so far this year.

Gold dropped on Thursday after a pledge by the US Federal Reserve to support its coronavirus-ravaged economy buoyed risk sentiment, with analysts saying the metal is facing resistance in the short term to breach the $2,000 psychological level.

Spot gold was down 0.7 per cent to $1,957.17 per ounce by 0531 GMT. US gold futures eased 0.1per cent to $1,950.60.

Gold prices in Dubai for 24K touched Dh237.75 per gram for 22K at 223.25 per gram; 21K at 213 per gram and 18K at 182.50 per gram.

"This price action points to a garden variety pullback - profit taking," said IG Markets analyst Kyle Rodda, adding that the retreat was mostly technical in nature, with gold failing to break above resistance around $1,980.

"In the short term, we might see any move higher above that ($1,980) level, towards $2,000, as something of a grind."

Gold jumped on Wednesday after the Fed pledged to keep interest rates near zero as the rapid rise in coronavirus cases dampened hopes for an economic recovery.

Low interest rates reduce the opportunity cost of holding non-yielding bullion.

Fed Chair Jerome Powell promised the central bank would "do what we can, and for as long as it takes" to support the US economy.

Limiting gold's advance, Asian stocks followed Wall Street higher.

"The likelihood of risk paring given market expectations were not met by the Federal Open Market Committee meeting is why gold has pulled back a little bit," said Stephen Innes, chief market strategist at financial services firm AxiCorp.

"This is just a natural reaction to a crowded trade."

Gold, which has risen over 28 per cent so far this year, is well supported by a weaker dollar, a worsening pandemic and likelihood of more stimulus, analysts noted.

Spot gold may test a support at $1,943 per ounce, as it failed again to break a resistance at $1,982, said Reuters technical analyst Wang Tao.

Silver dropped 2.1 per cent to $23.90 per ounce, platinum fell 0.3 per cent to $921.76 and palladium slipped 1.6p er cent to $2,122.44. - Reuters, business@khaleejtimes.com


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