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Gold slipped from a fresh record high as the dollar rebounded after the Federal Reserve delivered an expected rate cut following months of intense pressure from the White House to slash borrowing costs.
In his post-meeting press conference, Fed Chair Jerome Powell pointed to growing signs of weakness in the labor market and acknowledged that the risk to persistent inflation should be managed. His remarks were less dovish than his speech last month at the Jackson Hole symposium, which helped to boost expectations for rate cuts.
“Labor demand has softened, and the recent pace of job creation appears to be running below the break-even rate needed to hold the unemployment rate constant,” Powell told reporters in his post-meeting press conference. He added, “I can no longer say” the labor market is “very solid.”
The dollar rebounded after Powell’s comments, sending bullion as much as 1.2% lower before paring some losses. Spot gold was down 0.8% to 3,660.75 an ounce as of 4:08 p.m. in New York, following fluctuations between gains and losses immediately after the Fed announcement. A gauge of the US dollar rose 0.2%.
Gold had briefly hit a fresh record of $3,707.57 an ounce following the Fed decision to cut rates, since a lower-rate environment typically benefits the safe-haven asset.
Gold is reversing after getting caught in the spillover sentiment from other asset classes including equities and bonds as investors booked profits following the expected Fed rate cut, said Frank Monkam, head of macro trading at Buffalo Bayou Commodities.
Bullion’s 14-day relative strength index — a gauge of price momentum — is still above the critical 70 level, suggesting prices rose too fast with too many people buying, according to Monkam, who added that gold is vulnerable to these types of short-term corrections.
Gold has surged nearly 40% this year, outpacing the S&P 500 index and other asset and earlier this month eclipsed its inflation-adjusted peak from 1980. Persistent trade and geopolitical uncertainties, along with central banks purchases and inflows into exchange-traded funds, have added to the momentum.
(By Yvonne Yue Li)