Gold touches more than 4-month low as rate-cut bets cooled by Fed statements

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Gold futures headed sharply lower Thursday, putting bullion on pace for its lowest settlement since late December, a day after Federal Reserve Chairman Jerome Powell cast doubt about the prospect for a near-term rate reduction.

Gold for June delivery












GCM9, -1.11%










 on Comex fell $13.10, or 1% to $1,271 an ounce, touching an intraday low at $1,269.80, which would mark, if it holds, the metal’s lowest settlement since Dec. 21, according to FactSet data. Meanwhile, July silver












SIN9, -0.67%










 fell 7 cents, or 0.4%, to $14.66 an ounce.

Gold ended lower on Wednesday, then extended losses in electronic trading as Powell, in a news conference following the Fed’s widely expected decision to leave rates on hold, described subdued inflation pressures as “transitory.”

“At the press conference, Fed Chair Powell surprised observers with his apparent lack of concern about the lower inflation of late and gave no indication that the Fed might reduce interest rates in the foreseeable future,” wrote analysts at Commerzbank. “The dollar appreciated in response and the market corrected its rate cut expectations somewhat. That said, a rate cut is still expected in the U.S. before year’s end.”

Read: Powell’s press conference draws rave reviews for simplicity of Fed’s message

Gold often moves inversely to the U.S. dollar, with a more expensive greenback making commodities priced in it more expensive to users of other currencies. The ICE U.S. Dollar












DXY, +0.08%










 rebounded in the wake of the Powell comments Wednesday and was off slightly in Thursday action, down 0.1%.

Data from the World Gold Council showed global demand for the precious metal rose 7% year-on -year in the first quarter (see chart below).



The Commerzbank analysts noted, however, that demand a year ago was unusually weak.

The WGC said the year-over-year rise was driven largely by continued growth in central bank buying as well as flows into gold-backed exchange-traded funds. Central banks bought 145.5 tons of gold in the first quarter, the data showed, up 68% on the same period in 2018 and the strongest start to a year since 2013. ETFs and similar products added 40.3 tons, a rise of 49% over a year earlier.

On Thursday, gold and other metals held their ground after a report on weekly jobless claims showed it holding at a three-month high of 230,000 for the second week in a row at the end of April. Economists polled by MarketWatch had estimated new claims would fall to seasonally adjusted 215,000 in the seven days ended April 27 from 230,000 in the prior week.

Meanwhile, a report on the productivity of American workers in the first quarter increased at a 3.6% annual pace from January through March, the government said Thursday, marking the biggest such gain since the fall of 2014.

In other metals trade, July platinum












PLN9, -2.09%










 fell $11.60, or 1.3%, to $865.80 an ounce, while June palladium












PAM9, +0.62%










 was off $2.20, or 0.2%, to $1,342.20 an ounce.

July copper












HGN9, -0.55%










 was off 1.15 cents, or 0.4%, at $2.79 a pound.

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