Gold Optimism Fades as Traders Focus on Fed Signal for Rate Rise

Updated on
  • `Mixed' comments from Fed seen as bearish for gold: Heraeus
  • Minutes of Fed's Sept. 16-17 meeting released in Washington

Optimism in the gold market quickly faded as investors focused on the Federal Reserve’s signal that they’re still looking to raise interest rates.

Officials “anticipated that the recent global developments would likely put further downward pressure on inflation in the near term,” minutes of the Sept. 16-17 session of the Federal Open Market Committee showed Thursday. Still, policy makers said they were on track to raise rates this year. While equity traders were emboldened by the Fed’s patience and pushed shares higher, in the gold market a bearish mood won the day.

Higher rates curb the allure of gold by making it less competitive to assets that pay a yield, like bonds. Prices have been trapped in a bear market since 2013 as investors lost faith in the metal as a store of value.

“We have mixed conditions about whether the Fed’s going to raise rates,” Miguel Perez-Santalla, the sales and marketing manager at Heraeus Metals New York LLC, said in a phone interview. “But they’re still going to raise rates at some point, so people are going to price that in to gold falling.”

Gold for immediate delivery slipped 0.4 percent to $1,141.32 an ounce at 3:11 p.m. in New York. The metal climbed as much as 0.5 percent just after the minutes were released.

Gold futures for December delivery fell 0.4 percent to settle at $1,144.30 an ounce on the Comex before the minutes were published. Silver also declined. On the New York Mercantile Exchange, palladium and platinum gained.

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