Commodity investors also were watching for the latest update on Federal Reserve policy from a speech by Chairman Jerome Powell on the first day of the annual Jackson Hole central banker conference on Thursday which could influence trade for precious metals.
Top U.S. and Chinese officials were said to reaffirm their commitment to an initial phase of a Sino-American trade deal, helping to calm some concerns that tensions between the two sides were intensifying.
Bullion has mostly been under selling pressure, finishing lower in four of the past five sessions, including Tuesday, as equities take cues from optimism on vaccines and treatments for the COVID-19 pandemic. Uncertainty about the economic impact of the pandemic and the outsize policy measures to combat it have been at the heart of gold and silver’s rally since March.
However, the rally for precious metals has cooled somewhat since minutes from the Federal Open Market Committee’s meeting in late July signaled that the policy-setting group was unwilling to use unconventional methods to keep rates benchmark interest rates lower, which was viewed as a short-term negative for gold.
“Since the FOMC minutes, market participants have been reluctant to re-establish long positions in gold and short the dollar with any enthusiasm ahead of event risks, specifically the September FOMC and the Jackson Hole Symposium,” wrote Stephen Innes, chief global market strategist at AxiCorp, in a daily note, referring to a Thursday speech by Powell conducted via webcast and the upcoming Fed meeting next month.
The market anticipates that later this week, Powell will outline a plan for targeting inflation, which could provide them with more flexibility in allowing inflation to run above its annual 2% target, and help market participants anticipate policy moves. “We expect the Fed Chair to effectively pre-announce the outcome of the Monetary Policy Framework Review, which suggests the formal adoption of average inflation targeting,” wrote strategists at TD Securities, in a recent research note.
This could provide some buoyancy for metals because gold is often viewed as a hedge against inflation, market experts say.
“Gold and [currency] traders are currently positioning for a limited upside impact from an announcement of a soft average inflation target given it has been well-telegraphed by Fed public statements,” Innes wrote.
December gold GCZ20, -0.09% GC00, -0.09% was off $10.20, or 0.5%, at $1,929 an ounce, after the metal fell 0.4% in the previous session, marking its lowest finish for a most-active contract since July 27, according to FactSet data.
Meanwhile, September silver SIU20, +0.44% gave up 8 cents, or 0.3%, at $26.545 an ounce, following a 0.5% slide on Monday.
Also adding to the pressure for precious metals was a climb in U.S. bond yields, with the 10-year U.S. Treasury note yield TMUBMUSD10Y, 0.692% rising about 4 basis points from 0.64% on Monday to around 0.69%. Rising yields can undercut appetite for bullion which doesn’t offer a coupon.
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