(Bloomberg) -- Gold eased from its highest level in almost five months as investors digest the latest comments from U.S. Federal Reserve officials for clues on the potential time frame for tapering stimulus and as the dollar strengthened.
Philadelphia Fed President Patrick Harker said Wednesday it’s appropriate “to slowly, carefully move back” on bond purchases at a suitable time. Officials have said they will begin scaling back buying when the economy has made “substantial further progress” toward their goals, a condition many Fed-watchers believe will be met later this year.
Separately on Wednesday, the Fed released its Beige Book survey, which showed the pace of the U.S. recovery from the pandemic picked up in the past two months, sparking price pressures as businesses contended with worker scarcity and rising costs. Meanwhile, the Fed Board plans to begin gradually selling a portfolio of corporate debt purchased through an emergency lending facility launched last year, as Covid-19 was spreading panic through financial markets.
Bullion has stabilized near $1,900 an ounce in recent days amid growing demand for the haven asset, aided by signs of accelerating consumer prices and the risk of an uneven economic recovery. Traders will be watching Friday’s U.S. nonfarm payrolls report for May for further clues on the strength of the labor market and whether growth will spur inflation that could prompt governments and central banks to reduce stimulus.
“Investors are shrugging off all the uncertainties on the time line for taper discussions and are looking toward concrete data to provide a clearer picture on economic progress,” said Yeap Jun Rong, market strategist at IG Asia Pte. “With the Fed’s focus on employment, the jobs report on Friday will be key, and gold investors may be adopting a wait-and-see approach while awaiting more clarity on this.”
Investors are shifting their focus to inflation from potential tapering risks, Suki Cooper, a precious metals analyst at Standard Chartered Bank, said in a Bloomberg TV interview on Thursday. The Fed’s view of inflation as transitory has helped lift gold prices higher, she added. BlackRock Inc. Chief Executive Officer Larry Fink also said the potential for a spike in inflation may be underestimated.
Spot gold declined 0.7% to $1,894.27 an ounce by 10:04 a.m. in London. Prices climbed to $1,916.64 on Tuesday, the highest since Jan. 8. Silver, palladium and platinum also fell. The Bloomberg Dollar Spot Index rose 0.2%.
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