Gold Falls Sharply As The Fed Fails To Clarify Interest Rates Guidance

(August 19, 2020 - Daniel Hynes)

The ANZ China Commodity Index managed to keep its head above water as a stronger USD and underlying supply side issues saw wild swings in the complex. The precious metals suffered the most, with gold prices collapsing amid the currency moves. Silver and platinum also came under pressure. The energy sector also finished in the red, as crude oil and natural gas inched lower. Copper surged higher, dragging the rest of the base metals sector higher. Iron ore was slightly higher, helping push the bulk commodity into the green. Agriculture was relatively unchanged, with gains in rice and wheat offset by falls in soybeans and cotton.

Gold prices collapsed following the release of the Fed minutes, which seemed to suggest the central bank was backing off from providing further guidance on interest rates. The reluctance to use yield-curve control measures saw treasury yields rise and the USD strengthen. Gold has already been under pressure earlier in the session, with a stronger USD and rising risk appetite resulting in the precious metal falling more than USD200/oz to USD1,850/oz. After a brief rebound mid-session, prices fell sharply again as the market digested the implications of the Fed minutes. The rest of the complex was dragged lower, with silver falling nearly 5%.