(Bloomberg) -- Gold extended declines after Federal Reserve Chair Jerome Powell warned against any idea that the US central bank would start loosening monetary policy soon.
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Powell signaled the Fed will likely keep raising interest rates and leave them elevated for a while to contain high inflation. “Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said Friday in remarks prepared for the Kansas City Fed’s annual policy forum in Jackson Hole, Wyoming. “The historical record cautions strongly against prematurely loosening policy.”
Bullion slipped as much as 1% as Powell started speaking, but pared some losses as he finished the speech before extending the decline again. The dollar reversed losses to advance 0.2%.
“There is no waffling in Powell’s speech -- high rates will be here for some time. The only question now is will September be 50 bps or 75 bps,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York, referring to the size of the basis point increase. “Gold will fluctuate based on rate-hike expectations, perhaps in the $1,680-$1,820 range in the near future.”
Prior to Powell’s speech, investors saw the odds as roughly even of a half-point or another three-quarter point hike at the Fed’s Sept. 20-21 gathering. They remained in that vicinity after he spoke, but the amount of reductions in fed rates priced for 2023 briefly retreated.
The Fed chair said the central bank’s decision at the September meeting “will depend on the totality of the incoming data and the evolving outlook.”
Read more: Powell talks tough, says rates likely to stay high for some time
Spot gold slipped 1.2% to $1,738.28 an ounce as of 1:45 p.m. in New York and is set to finish the week 0.5% lower. Bullion for December delivery fell 1.2% to settle at $1,749.80 on the Comex. The Bloomberg Dollar Spot Index was up 0.4% after falling as much as 0.5% earlier. Spot silver, platinum and palladium all fell.
Copper pared gains after Powell’s speech and is still heading for a weekly advance after China’s announcement of a further 1 trillion yuan ($146 billion) in stimulus to be largely targeted at infrastructure. Tighter supply driven by a drought in the country is also adding support. That has already forced several smelters offline as the government rations power.
Copper futures were up 0.4% to settle at $8,160.50 a metric ton on the London Metal Exchange and finished the week 1% higher. Most other main metals gained, with aluminum up 2.5% and zinc rising 0.5%.
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