Gold falls over 1% after Fed keeps rates steady, strong US data

Gold fell more than 1% on Wednesday as the Federal Reserve held interest rates steady and gave little indication of when cuts might occur, while strong US economic data further dimmed the appeal of the zero-yield asset.

Spot gold was down 1.5% at USD 3,275.92 per ounce, as of 03:08 p.m. ET (19:08 GMT).

US gold futures settled 0.8% lower at USD 3,352.8.

The Federal Reserve held interest rates steady in a split decision that gave little indication of when borrowing costs might be lowered and drew dissent from two of the US central bank’s governors.

Fed Chair Jerome Powell said the central bank had made no decision about September, when many market participants were expecting the first interest rate cut of the year to be made. He added that “downside risks to the labor market are certainly apparent.”

“Powell sticks to his guns as he focuses more on keeping inflation in check than employment concerns,” said Tai Wong, an independent metals trader.

“The dollar jumped, putting additional pressure on gold, though bullion continues to hold the bottom of the range. While a deeper retracement may occur, that will likely draw buyers as the overall argument for gold – uncertainty, high US debt, de-dollarization, remains robust.”

The ADP National Employment report showed US private payrolls rose more than expected in July, though signs of labor market softening persisted.

Nitesh Shah, commodities strategist at WisdomTree, noted that the louder the Trump administration voices its distaste for current policymaking, the more likely it is to drive gold prices.

Gold tends to perform well in a low-interest rate environment and during periods of uncertainty.

Spot silver dropped 3.2% to USD 36.97 per ounce, hitting a near three-week low.

Platinum lost 6.6% to USD 1,303.19, its lowest since June 24, while palladium was down 4.9% to USD 1,196.75.

It looks like some profit-taking by the shorter term futures traders, said Jim Wyckoff, a senior analyst at Kitco Metals.

“The fact that the gold market has sold off a little bit recently, I think that’s put some pressure on platinum and Palladium.”

(Reporting by Sherin Elizabeth Varghese and Sarah Qureshi in Bengaluru; Editing by Tasim Zahid, Vijay Kishore, and Rod Nickel)