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Gold prices gain as markets shrug off Fed’s taper decision

06:20, 4 November 2021

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Rows of gold bracelets in a store on the Grand Bazaar in Istanbul.
Rows of gold bracelets in a store on the Grand Bazaar in Istanbul, Turkey - Photo: Shutterstock

Gold prices rebounded, ending two-day loss, after the US Federal Reserve (Fed) announced a widely expected move to start reducing its asset purchases.

Spot gold rose 0.30% to $1,775.07 an ounce. Comex December futures gained 0.65% to trade at $1,775.45 an ounce.

“Gains in gold prices are the impact from yesterday’s FOMC (the Federal Open Market Committee) meeting. Markets are a bit disappointed because initially they expected the Fed would be more hawkish, but nothing special came out of it,” said Lukman Leong, analyst at Jakarta-based Deu Calion Futures.

Disappointing outcome

The Fed announced on Wednesday that later this month, it will begin scaling back its purchases of Treasury and mortgage securities that have supported the economy through the Covid-19 pandemic.

It also maintained its view that elevated inflation print in recent months is transitory.

US100

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Short position overnight fee 0.0042%
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Short position overnight fee 0.0140%
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Short position overnight fee 0.0140%
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Short position overnight fee -0.0311%
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Spread 0.03

“Markets are also disappointed with the Fed’s view about inflation trajectory,” Leong added.

Less shiny amid policy tightening

The precious metal is used as a hedge against inflation, but expectations that central banks around the world will tighten policies may pressure gold price.

Strong corporate earnings on the back of post-pandemic rebound also prompts more investments into the stock market and lowering the appetite on gold.

“Gold’s lustre is dimmer. Sharp drop in prices is unlikely, but they would struggle to go up,” said Leong.

Read more: Precious metals forecast: Interest rate hikes and the market

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