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– Bloomberg

Gold edged higher after capping the biggest drop in five months as the Federal Reserve sped up its expected pace of policy tightening amid optimism about the labor market and heightened concerns over inflation.

Fed Chair Jerome Powell told a press conference Wednesday that officials would begin a discussion about scaling back bond purchases used to support financial markets and the economy during the pandemic. They also released forecasts that show they anticipate two interest-rate increases by the end of 2023 — sooner than many thought — and they upgraded estimates for inflation for the next three years.

Bullion’s steadying near a six-week low as investors weigh the outcome of the Fed’s two-day gathering, which saw the central bank hold the target range for its benchmark policy rate unchanged at zero to 0.25%, where it’s been since March 2020, and maintain the $120 billion pace of its monthly bond purchases. Powell said the interest-rate forecasts “should be taken with a big grain of salt,” and cautioned that discussions about raising rates would be “highly premature.”

“Gold definitely took a hit on the more hawkish comments coming from Powell, but it looks like the market may have overreacted a bit, with traders buying the dip today,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. Gold is in for a “bumpy ride” as traders are undecided over “whether or not higher inflation is bullish or bearish for precious metals prices, as we have concerns around Fed tightening.”

Spot gold rose 0.6% to $1,822.96 at 11:29 a.m. in Singapore, after tumbling to $1,803.87 on Wednesday, the lowest intraday level since May 6. Silver and platinum advanced, while palladium declined. The Bloomberg Dollar Spot Index was steady after rising 0.9% on Wednesday.

“The Fed’s hawkish pivot is a major buzzkill for gold bulls that could see some momentum selling over the short term,” said Edward Moya, a senior market analyst at Oanda Corp. “Despite the recent weakness for gold over the past week, gold’s medium-and-longer term outlook remains bullish. The line in the sand that needs to be defended for bullish bullion investors is the $1,800 level.”

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