Gold Holds Near Four-Month High as Fed Minutes, Bitcoin in Focus

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Gold Holds Near Four-Month High as Fed Minutes, Bitcoin in Focus

Ranjeetha Pakiam
·2 min read

(Bloomberg) -- Gold steadied near the highest level in more than four months as investors assessed the minutes from the Federal Reserve’s meeting in April that flagged the possibility of a debate on scaling back asset purchases.

“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,” according to minutes published Wednesday. Treasury yields and the dollar rose after the release. In a press conference following last month’s meeting, Chair Jerome Powell had said that it was premature to start talking about tapering.

Rising inflation expectations and a resurgence of coronavirus cases in some countries have revived interest in gold as a hedge and haven asset, with a rebound seen in holdings in bullion-backed exchange-traded funds. While U.S. policy makers have signaled they intend to maintain an accommodative stance for a prolonged period, any hints of a timeline for paring back exceptional stimulus could weigh on the precious metal.

“With the Fed apparently inching toward talking about tapering, 10-year Treasury yields rallied on Wednesday, pushing gold lower,” said Nicholas Frappell, global general manager at Sydney-based ABC Bullion. “Still, gold appears to have recovered short term bullish momentum after the dip despite weak physical demand and a slight bounce in the Dollar Index.”

Spot gold rose 0.3% to $1,875.77 an ounce by 12:26 p.m. in Singapore. Prices climbed to $1,890.13 on Wednesday, the highest since Jan. 8, but erased gains after the release of the Fed minutes. Silver was little changed, while palladium and platinum advanced. The Bloomberg Dollar Spot Index edged lower after climbing 0.5% on Wednesday.

The extreme price swings in cryptocurrencies on Wednesday may have also helped support bullion.

“It appears as though the recent weakness in Bitcoin is seeing some investors shifting to gold,” said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore.

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