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Gold futures headed for back-to-back declines on Thursday, pressured by higher U.S. Treasury yields and a rising dollar, as some Federal Reserve officials said they favored a near-term unwind of COVID-era monetary policies.
Investors are awaiting the annual Jackson Hole central-bankers symposium on Friday where Fed Chairman Jerome Powell may indicate that the central bank will slow monthly purchases of Treasurys and mortgage-backed securities, which could influence bullion prices.
Gold will likely “remain range-bound over the next 24 hours or so, and hover around $1,775 to $1,810 area until we hear from…Powell,” said Fawad Razaqzada, market analyst at ThinkMarkets.
“What happens thereafter will be dependent on the direction of the U.S. dollar and bond yields,” he said in a market update. “If Powell appears to be dovish then gold should be able to rise further in the near-term.”
Ahead of Powell’s comments, commodity investors parsed data Thursday that showed that weekly U.S. jobless claims for the week ended Aug. 21 rose by 4,000 to 353,000, compared with average expectations for 350,000 forecast by a Dow Jones-polled economists.
Meanwhile, a second reading of U.S. second-quarter GDP rose to a 6.6% growth rate from an initial reading of 6.5%.
December gold
GCZ21,
GC00,
was trading $2.30, or 0.1%, lower at $1,788.70 an ounce, following a 1% decline on Wednesday, posting the biggest one-day percentage decline since Aug. 9 for a most-active contract, FactSet data show.
Silver for September delivery
SIU21,
SI00,
fell 12 cents, or 0.5%, to nearly $23.66 an ounce, after declining 0.5% on Wednesday.
Markets early Thursday digested comments from Kansas City Fed President Esther George, who said the U.S. economy has hit the necessary benchmark of “substantial” progress needed to start to slow down its $120 billion a month asset purchases.
“I would be ready to talk about tapering sooner rather than later,” she said in a CNBC interview ahead of Powell’s Jackson Hole speech.
St. Louis Federal Reserve President James Bullard, following George, also told the business network that it “does seem like we are coalescing on a plan,” referring to an eventual wind-down of Fed’s asset purchases.
In the medium term, the “key question is how central banks will adjust their respective monetary policies,” said Razaqzada. “Are they going to raise interest rates sharply to combat inflation or will it be a very gradual policy normalisation process?”
Razaqzada said he expects a gradual policy normalization “as the impact of temporary factors pushing up inflation will likely wane in the coming months.” This should help keep precious metals fundamentally supported, he said, adding that he’d be “surprised if gold does not climb and stay above $2,000 in the medium- to long-term outlook.”
Lower-bound trading for bullion Thursday came as benchmark 10-year Treasury note yields
TMUBMUSD10Y,
rose to 1.36%, adding to a climb to a two-week high, and competing against gold and silver, which don’t offer a coupon, for safe-haven demand.
Meanwhile, the U.S. dollar, as gauged by the ICE U.S. Dollar Index
DXY,
was edging 0.2% higher, creating some headwinds for dollar-pegged assets.
Among other Comex-traded metals, September copper
HGU21,
shed 0.1% to $4.26 a pound. The December copper contract
HGZ21,
which is also among the most active, was little changed at nearly $4.28.
October platinum
PLV21,
lost 1% to $983.60 an ounce and September palladium
PAU21,
traded at $2,389 an ounce, down 1.7%.
