Gold prices headed sharply lower for a second day on Thursday, with downward momentum for the precious metal gaining some steam after the Federal Reserve said that it wasn’t inclined to use unconventional methods to keep interest rates low, even as the central bank offered a pessimistic outlook for the economy.
In their discussions, reflected in the minutes from the central bank’s meeting on July 28-19 that were published a half-hour after Comex metals settled on Wednesday, Fed officials said there had been an increase in uncertainty about the economic outlook since their prior meeting in mid-June.
“We are at a very vulnerable spot, and I don’t know what the next shoe to drop will be,” said Richmond Fed President Thomas Barkin, in comments on Wednesday after the release of minutes.
However, the decision to hold off on implementing so-called yield-curve control, has been interpreted by some as not as dovish a message from the Fed as had been hoped, which nudged the dollar higher and weighed on bullion.
A measure of the U.S. dollar, the ICE U.S. Dollar Index DXY, +0.06%, was up less than 0.1% on Thursday after a roughly 0.5% gain on Wednesday for the gauge against a half-dozen currencies. The dollar had hit a roughly two-year low last week. A firmer dollar can undercut the appeal of buying gold for overseas buyers.
“The rebound in the US dollar has also sparked a fresh bout of weakness in gold prices which sold off sharply and are now testing support at the $1,920 an ounce, and the renewed uncertainty over the pace of further monetary stimulus from the Federal Reserve,” wrote Michael Hewson, chief market analyst at CMC Markets UK.
Meanwhile, September silver prices SIU20, -0.49% shed a penny, or less than 0.1%, at $27.305 an ounce, after gold’s sister commodity declined 2.6% in the previous session.