Commodities: Gold, silver decline as UK, US central banks set hawkish tones
Precious metals gold and silver went for a run south on Thursday with each hitting multi-week lows as markets mulled more hawkish stances from the Bank of England and US Federal Reserve.
The yellow metal's retreat followed a more hawkish BoE standing pat on rates today, after the Fed lifted its benchmark rate as expected last night and indicated more hikes this year.
BoE policymakers voted 5-3 in favour of holding rates, against views for a 7-1 split. The Fed also flagged that it was going to start reducing its balance sheet.
At 15:20 BST, on Comex, gold fell 1.61% to $1,255.3 an ounce. Silver fell 2.57% to $16.70 an ounce. Copper was down 0.37% to 256.4 cents a pound.
David Madden, market analyst at CMC Markets UK, said gold was firmly weaker following the Fed's rate call, and so, too, silver.
"The interest rate hike came as no surprise, but traders were not expecting the Fed chair Janet Yellen to lower the inflation forecast and increase the growth outlook," said Madden.
"By doing this, Ms Yellen, is basically saying the weak inflation that the US is experiencing is not going to hold them back from further monetary policy tightening.
"The Fed will start to unwind its balance sheet this year, and this added to the hawkish stance of the announcement. Going into the meeting, dealers were hoping for ‘dovish hike’, they got their hike, but there was nothing dovish about it.
Collectively, these proved beneficial for both the greenback and sterling. The dollar-spot index was up 0.57% to $97.489 at 15:35 BST, while sterling rose 0.13% to $1.2767.
Natixis metals analyst Bernard Dahdah told Reuters that -- as with previous rate hikes by the Fed -- the next day the market began looking at the probability of more.
"The Fed was talking about another potential rate hike later this year, which is negative for gold," Dahdah told the news agency.
"But there's still enough for people to worry about in geopolitics at different levels," he said.
On London Metals Exchange, three-month industrial metals were mostly down. Zinc rose 0.85%, but tin shed 0.9%, aluminum faded 0.34% and copper eased 0.31%.
Meanwhile, Nymex-priced West Texas Intermediate crude was down 0.2% to $44.64 a barrel. Intercontinental Exchange-traded Brent added 0.4% to $47.02 a barrel.
Madden said Brent and WTI had been bogged down by persistent concerns about over-supply.
"Traders have their doubts that some Opec members will stick to the production cut agreement," he said.
"Adding to that, the Intentional Energy Agency (IEA) anticipates that shale production will rise also. Oil has been falling since the OPEC meeting in late May, and the downward trend is not showing any signs of changing."