Gold futures ended lower on Wednesday, giving back a portion of the gains from a day earlier as U.S. benchmark stock indexes moved higher.
Futures added to losses after briefly popping higher in electronic trading in the immediate wake of the Federal Reserve's policy update, as Fed Chairman Jerome Powell held a news conference. The central bank's Federal Open Market Committee left its short-term fed-funds rate unchanged as expected, but cut the rate it pays on excess bank reserves to 2.35% from 2.4%.
As many expected, the statement helped gold "somewhat" with the unchanged short-term fed-funds rate "removing some fears of hawkish thoughts as [the] economy is moving ahead without undue inflation," said George Gero, managing director at RBC Wealth Management, in an email update.
But as Powell spoke at a press conference after the statement, the dollar strengthened "which sharply dampen[ed] gold traders' enthusiasm," prompting a reversal of trades and sellers to continue looking for bids, said Gero.
Gold for June delivery GCM9, +0.64% was at $1,287 an ounce shortly after the Fed announcement, then moved down to $1,277.90 as Powell spoke. The contract had posted a fall of $1.50, or 0.1%, to settle at $1,284.20 an ounce on Comex head of the Fed news. Most-active July silver SIN9, +2.28% shed 25.5 cents, or 1.7%, to $14.729 an ounce.
Jeff Wright, executive vice president of GoldMining Inc. told MarketWatch that the Fed statement itself was positive. "In particular, the interest rate cut on excess reserves should act as a small quantitative easing mechanism," which is supportive for gold in the short-to-medium term, he said.
During the press conference, Powell said the Fed is "strongly committed" to its 2% inflation target. He also said Fed policy is still appropriate, even though core inflation has been softer than expected.
See: The case for the Fed to keep an interest-rate hike on the table revolves around financial stability
The ICE U.S. Dollar Index DXY, -0.36% lost more ground after the Fed statement, with the index down 0.3% to trade near the session's low of 97.15, then moved up by 0.2% to 97.69 during Powell's conference. Gold and the dollar often move inversely as a richer dollar dulls the appeal of investors using other currencies, and vice versa.
Economic data Wednesday were mixed. Payroll-processor ADP reported that private-sector employers hired 275,000 people in April, but American manufacturers expanded in April at the slowest pace since President Donald Trump was elected, with the Institute for Supply Management manufacturing index slipping to 52.8% from 55.3% in March.
In other metals trade, July platinum PLN9, +2.44% fell $14.30, or 1.6%, to $877.40 an ounce, while June palladium PAM9, +1.66% dropped $38.30, or 2.8%, to settle at $1,344.40 an ounce. July copper HGN9, +1.53% lost 10.3 cents, or 3.5%, to $2.802 a pound.
Among exchange-traded funds, SPDR Gold Shares GLD, +0.59% climbed by 0.2%.