Gold tumbles 3% as FOMC minutes lift dollar, US Treasury yields

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Gold tumbles 3% as FOMC minutes lift dollar, US Treasury yields

On Wednesday, the precious safe-haven metal gold futures had faltered as much as 3 per cent following the readouts of US Federal Reserve’s July 28-29 meet and the Treasury yields rose as the US Federal Reserve’s July meet minutes had unveiled that the policymakers had shown little intent to put an end to their $120 billion in bond repurchase program each month until end-2021 and to incline a cap on Treasury yield curves, eventually spurring up hopes of a higher flow of credits across the financial market which in effect had raised the American currency and had led to a brutal sell-off wave for the precious metal alongside other safe-haven currencies such as Japanese yen and Swiss Franc.

In point of fact, Wednesday’s withering sell-off of gold alongside other safe-haven assets was almost entirely prodded by an FOMC minutes statement that said the US Central Bank would keep purchasing $80 billion worth of US Treasury bonds alongside another $40 billion in mortgage-backed bonds in order to maintain an insistent influx of credits into the US economy, while the US Dollar Index (DXY) measured against a basket of six major currencies had wrapped up the day 0.8 per cent higher following a late-session rally.

Gold gobbles down as Fed pledges to further policy easing

Apart from that, as a majority of Fed policymakers had pledged to continue the US Central Bank’s bond buyback program until a notable improvement in US economy which has still been bearing the brunt of a pandemic-propelled recession, the spot gold futures had been foundered as much as 3.4 per cent to $1,932.09 an ounce, while the US gold futures had wrapped up the day 2.1 per cent lower to $1,970.30 per ounce.

Meanwhile, adding that the Fed had shown little intent to put a cap on the Treasury yield, eventually shoring up appetite for the US Treasuries, a senior market analyst at brokerage firm OANDA, Edward Moya said on the day’s commodity market closure, “One of the concerns was that the Fed was possibly going to adopt yield curve control, that would’ve been a strong catalyst for continued dollar weakness, but they said they are not considering it right now. That would have been the most dovish outcome from the minutes, but we didn’t get that.