Investing.com - Gold prices hit a two-week low on Thursday after the Federal Reserve dashed hopes for more aggressive policy easing, strengthening the U.S. dollar.
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange, slid $20.45, or 1.4%, to $1,417.35 a troy ounce by 8:44 AM ET (12:44 GMT). That was still off their intraday low of $1,405.30, the lowest price since July 10.
Spot gold dropped as far as $1,402.93, its lowest level since July 16, but had since pared losses, down 0.5% to $1,405.78.
Although the Fed came through with the expected quarter-point cut to interest rates, the head of the U.S. central bank Jerome Powell “sent a hawkish message to dampen expectation of further easing”, Pinchas Cohen, analyst at Investing.com, said.
“Stating ‘the labor market remains strong and economic activity has been rising at a moderate rate’ the Fed was clearly signaling to the market it should not overprice additional cuts,” he said.
The U.S. dollar spiked to two-year highs on the back of Powell’s remarks, denting demand for gold and other commodities which are priced in the greenback.
“After strengthening in tandem with the dollar over the past few months, gold is now sinking - a sign it may be reverting to its customary inverse relationship with the greenback,” Cohen said.
He added that the inverse relationship may now well outweigh other bullish factors for gold such as a negative yield environment in Europe and Japan, multiple geopolitical risks and a global slowdown.
A report released from the World Gold Council on Thursday confirmed a bullish backdrop for gold during the first half of 2019, with demand for the precious metal hitting a three-year high, “largely due to record-breaking central bank purchases." It noted that the buying came from "a diverse range of - largely emerging - countries.
In other metals trading, silver futures declined 2.3% to $16.032 a troy ounce by 8:47 AM ET (12:47 GMT).
Palladium futures sank 4.9% to $1,449.15 an ounce, while sister metal platinum traded down 3.1% to $851.40.
In base metals, copper lost 0.4% to $2.656 a pound.