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PRECIOUS-Gold falls 1 pct, hits three-week low after Fed statement

Kitco News

* Gold slides to lowest since Aug. 28

* Fed keeps rates steady, will trim portfolio

* Fed signals it expects rate hike by year-end


(Updates prices; adds details on markets, comment about net longs)

By Dave Gregorio and Peter Hobson

NEW YORK/LONDON, Sept 20 (Reuters) - Gold prices fell 1 percent on Wednesday after the U.S. Federal Reserve left interest rates unchanged but signaled it still expected to raise interest rates by year-end.

Gold had been creeping higher in the minutes before the Fed released a statement about its latest two-day policy meeting, then reversed course and fell. It briefly sank below the $1,300 mark that traders had viewed as psychological support. Bullion hit $1,295.81 an ounce, the lowest since Aug. 28.

As expected, the Fed also said it would start to reduce the portfolio of Treasuries and mortgages it acquired through its quantitative easing (QE) program after the financial crisis. New projections after the Fed meeting showed 11 of 16 officials favored higher benchmark U.S. interest rates by year-end.

"The Fed came out and said they were going to do their QE reversal of about $10 billion a month; they still expect a Fed rate hike in December and three more in 2018. This puts a little pressure on gold," said Jeff Klearman, portfolio manager at GraniteShares, a provider and manager of exchange traded funds.

Spot gold was down 0.76 percent at $1,301.2 an ounce by 3:55 p.m. EDT (1955 GMT), trading back above the $1,300 level.

"The natural resistance is that hard number of $1,300," said Dan Denbow, portfolio manager at USAA Precious Metals and Minerals Fund.

Benchmark U.S. Treasury yields jumped to their highest in six weeks, while Wall Street stocks fell after the Fed meeting. The dollar turned higher against a basket of currencies, reversing an earlier drop. Bill O'Neill, co-founder of Logic Advisors, noted that speculative investors had added to their net long position in gold for nine straight weeks, making the market vulnerable to more selling.

"A number of them are underwater so they're already in a losing mode," he said, adding that if gold slips much more "that would add a significant number of very weak longs in the market." He said gold selling could intensify if U.S. Treasury yields rise more or the dollar strengthens further.

Rising bond yields make non-yielding assets such as bullion less attractive. A rising dollar also tends to hurt the value of gold.

Spot silver was down 1.27 percent at $17.10 an ounce, while platinum fell 0.63 percent at $942 an ounce. Palladium was up 0.39 pct at $912 an ounce.

The most active U.S. gold futures for December delivery settled up $5.80, or 0.44 percent, at $1,316.40 per ounce.


(Additional reporting by Apeksha Nair in Bengaluru; Editing by Richard Chang and Lisa Shumaker)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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