Gold pares gains after Fed Powell's comments despite rate cut

Gold

Gold prices pared gains on Wednesday as markets digested comments from U.S. Federal Reserve Chair Jerome Powell regarding the future policy path, despite the central bank cutting interest rates by a widely expected quarter percentage point.

Spot gold was up 0.3% at $3,964.39 per ounce, as of 3:10 p.m. ET (1910 GMT), after rising as much as 2% earlier in the session.

U.S. gold futures for December delivery settled 0.4% higher at $4,000.7 per ounce.

The Fed lowered the overnight benchmark rate to a target range of 3.75%–4.00%, the second time the U.S. central bank eased this year.

Speaking at a press conference, Powell offered a note of caution about what lies ahead. "In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December," Powell said, adding, "a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it, policy is not on a preset course."

"Gold had a logical reaction to Powell trying to walk back expectations for a December cut. We're already seeing Fed funds futures trimming expectations, that would be dollar positive and gold negative," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

The dollar index extended gains, making greenback-priced bullion more expensive for overseas buyers. [USD/]

Non-yielding gold typically thrives in a low-interest-rate environment and during times of economic uncertainty.

"The fact that a December cut is now in question will blunt the precious metals bounce," said Tai Wong, an independent metals trader.

On the trade front, U.S. President Donald Trump announced a trade deal with South Korea and expressed optimism about a similar truce with China's Xi Jinping, ahead of talks scheduled for Thursday.

Gold has gained 51% year-to-date, and hit a record high of $4,381.21 on October 20, but has fallen over 3% so far this week, in part due to easing trade tensions.

Elsewhere, spot silver gained 1.7% to $47.82 per ounce, platinum was up 0.6% at $1,595.81 and palladium rose 1.9% to $1,420.05.