Gold slipped as much as 1% on Thursday after the U.S. Federal Reserve disappointed expectations for further stimulus to spur inflation and support the economy, battered by the coronavirus crisis.
Spot gold dropped 0.9% to $1,940.96 per ounce by 0951 GMT. U.S. gold futures slipped 1.2% to $1,947.40
“The gold market was somewhat disappointed by the lack of outlook or guidance (about) what the Fed would do in order to spur inflation,” Carsten Menke, analyst at Julius Baer, said.
He said as gold has moved from below $1,200 to more than $1,900, quite a few risks have been priced into gold and to see even more upside, there should be an even greater pool of risks which could affect financial markets.
Also reducing gold’s appeal for investors holding other currencies, the dollar index rebounded to a more than one-week high after the Fed pointed to a faster economic recovery, with unemployment falling more quickly than forecast in June.
But keeping a floor under non-yielding gold, the Fed pledged to keep rates pinned near zero levels until inflation was on track to “moderately exceed” its 2% inflation target “for some time.”
Elsewhere, the Bank of Japan kept monetary policy steady on Thursday and suggested there would be no immediate expansion of stimulus.
Near-zero interest rates globally and demand for a hedge against perceived inflation have helped gold to gain about 28% so far this year.
Independent analyst Ross Norman said gold had already done a lot of the “heavy lifting” year-to-date, and would not go much higher or lower. “The best indicator that momentum has come off gold is in the Exchange Traded Funds,” he said.
Investors have slowed their rapid accumulation of gold-backed ETFs seen earlier this year.
Elsewhere, silver dropped 1.6% to $26.79 per ounce, platinum dipped 2.3%, to $946.11 per ounce and palladium slipped 1.3% to $2,369.31.
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