Gold Has Biggest Drop in Two Months Due to Fed Effect
September 21 2017 - 2:58PM
Dow Jones News
By Ira Iosebashvili
Gold prices suffered their largest decline in more than two
months as investors reacted to a hawkish outlook from the Federal
Reserve.
Gold for December delivery closed down 1.6% at $1,294.80 a troy
ounce on the Comex division of the New York Mercantile Exchange,
the largest drop since July 3.
The Fed left rates unchanged Wednesday and hinted it could raise
rates again in 2017, even though persistently low inflation has
given some officials second thoughts about a move by then.
Officials also said they would begin shrinking the U.S. central
bank's portfolio of bonds in October.
Expectations of a more hawkish Fed tend to weigh on gold, which
struggles to compete with yield-bearing investments when rates
rise.
The Fed's statement " temporarily takes the shine off gold,"
analysts at Standard Bank said in a note to clients. They believe
gold prices can drift lower in the short term as investors continue
adjusting their positions to account for a more
hawkish-than-expected Fed.
Gold prices are up around 11% this year.
Meanwhile, prices for copper and other base metals took a hit
after Standard & Poor's became the last of three major ratings
firms to downgrade China, the world's largest consumer of raw
materials.
In a statement Thursday, S&P said the downgrade to A+ from
AA- reflected its assessment that "a prolonged period of strong
credit growth has increased China's economic and financial risks."
Moody's Investors Service lowered its China rating in May, while
Fitch Ratings did so in 2013.
The downgrade pushed some investors to lock in gains on
industrial metals, after a sharp rally during the summer sent
prices to multiyear highs.
Copper for December delivery closed down 1.2% at $2.9345 a
pound. Nickel for delivery in three months was down 3.3% at $11,005
a metric ton on the London Metal Exchange.
Write to Ira Iosebashvili at ira.iosebashvili@wsj.com
(END) Dow Jones Newswires
September 21, 2017 14:43 ET (18:43 GMT)
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