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Gold prices rebound after Fed accelerates tapering pace

By Daniel Tyson

16:16, 16 December 2021

Seven bars of gold
Gold prices rebound after US Fed tapers asset purchase programme – Photo: Shutterstock

Gold prices rallied Thursday morning and yields on US Treasuries fell a day the US Federal Reserve outlined plans to slow bond purchases and a survey of members suggested three interest rate raises in 2022.

At 8:00 ET (UTC-5) gold futures were indicated at $1,783.90 per ounce, three hours later the price jumped to $1,798.30, less than $2 below the precious metal’s $1,800 psychological threshold.

Powell’s power

On Wednesday, the 12-member Federal Open Market Committee (FOMC) announced the US central bank would begin reducing its purchases of Treasury bonds by $10bn (£7.6bn) a month and mortgage-backed securities by $5bn, which could end the stimulus program by June 2022.

Meanwhile, yields on 10-year Treasury notes retreated to 1.431% Thursday from 1.460% on Wednesday. Yields move in the opposite direction to bond prices and barely moved in response to the Fed’s shift to tighten monetary policy, according to CNBC.

People from Wall Street to Main Street took interest in what was said at the meeting. A survey of the FOMC members – known as dot plots – suggests the central bank could raise the federal funds rate three times next year to a range of 0.75%–1% from its current range of 0%­–0.25%.

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COVID-19 impact

Analysts believe gold could get a boost from investors who want to hedge economic risks from the Omicron variant.

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“This could possibly be because of rising cases due to the Omicron variant, which persuaded investors to take some exposure to the precious metal until the coronavirus situation cools down,” said Naeem Aslam, chief market analyst at AvaTrade in a client note obtain by

Fed Chair Jerome Powell’s announcement didn’t immediately send gold prices up. They declined 0.4% Wednesday, according to FactSet data, marking a two-week low settlement.

“This is odd because when a central bank acts aggressively, the dollar index usually climbs as higher interest rates push the demand for that currency higher. However, this was not the case after yesterday’s FOMC meeting,” Aslam wrote.

The Fed’s announcement had a positive impact on precious metals. Silver futures for February 2022 was up 4.5% to $22.52 an ounce; Copper jumped more than 3% to $4.31 per pound; Platinum was selling at $936.70 per ounce, up 3.6% and Palladium was nearly 10% higher at $1,706 per ounce.

Meanwhile, the ICE US dollar index was down 0.02%.

Read more: Copper price edges higher as markets eye signs of US rate hike

Markets in this article

3.83806 USD
0.03496 +0.920%
2004.85 USD
-23.96 -1.180%
956.70 USD
-33.6 -3.470%
924.15 USD
9 +0.990%
23.018 USD
-0.797 -3.350%

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