Metals

Gold firms above $1,800 post Fed minutes as U.S. yields dip

Key Points
  • Spot gold extended gains slightly post the release of the minutes and was up 0.4% to $1,804.16 per ounce by 2:36 p.m. ET, having hit its highest since June 17 at $1,814.78 on Tuesday.
  • U.S. gold futures settled 0.4% higher at $1,802.10 per ounce.
Crushed stones and mined soil are deposited in a pile before being processed at Newmont Mining's Yanacocha gold mine in Cajamarca, Peru, Oct. 21, 2015.
Dado Galdieri | Bloomberg | Getty Images

Gold firmed above $1,800 an ounce on Wednesday as U.S. Treasury yields declined after minutes from the Federal Reserve's June meeting showed officials felt its 'substantial progress' goal on economic recovery has not yet been met.

Spot gold extended gains slightly post the release of the minutes and was up 0.4% to $1,804.16 per ounce by 2:36 p.m. ET, having hit its highest since June 17 at $1,814.78 on Tuesday. U.S. gold futures settled 0.4% higher at $1,802.10 per ounce.

Gold extended gains above $1,800, "as the minutes were broadly in line with market expectations, rather than presenting additional hawkish surprises," said Suki Cooper, an analyst at Standard Chartered.

"The threshold for tapering has yet to be met and the rise in inflation largely reflects temporary factors," and the resultant weakness in yields have contributed to gold's upside, Cooper added.

Fed officials last month felt that substantial further progress on the economic recovery "was generally seen as not having yet been met," though participants expected progress to continue.

A surprise hawkish tilt by the U.S. central bank last month caused gold to slump 7% in June.

Meanwhile, benchmark 10-year Treasury yields hit their lowest in more than four months.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-interest bearing bullion.

"Rising uncertainty around monetary policies, inflation and increasing risk of equity market volatility should favor safe-haven gold demand," ANZ analysts said in a note.

"Central banks have increased gold purchases in recent months, offsetting some of the physical demand losses in Q2 2021."

Elsewhere, silver steadied around $26.14 per ounce, platinum eased 0.5% to $1,086.32, while palladium climbed 2.6% to $2,865.27.