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Gold Holds Worst Loss This Month as Fed Meeting Outcome Awaited

By Ranjeetha Pakiam and Eddie Spence

Gold held its worst daily loss since late November as investors considered the latest U.S. inflation data and counted down to the conclusion of the Federal Reserve’s last meeting of the year later today.

A one-ounce Britannia gold coin sits on one hundred gram gold bars at Gold Investments Ltd. bullion dealers in this arranged photograph in London, U.K., on Wednesday, July 29, 2020. Gold held its ground after a record-setting rally as investors awaited the outcome of a Federal Reserve meeting amid expectations policy makers will remain dovish, potentially spurring more gains. Photographer: Chris Ratcliffe/Bloomberg

Prices paid to U.S. producers posted a record annual increase of almost 10% in November, a surge that will sustain a pipeline of inflationary pressures well into 2022. That’s boosting the case for the Fed to tighten monetary policy, which is weighing on non-interest bearing assets such as precious metals. U.S. retail sales rose by less than forecast in November, suggesting that consumers are tempering purchases against a backdrop of the fastest inflation in decades.

All eyes are now on the central bank’s meeting, the results of which are released later Wednesday. The Fed could announce a doubling of the pace of its bond-buying taper and lay out a steeper path of interest-rate hikes, according to Bloomberg Economics. 

Bullion is heading for its first annual loss in three years amid diminishing monetary support from central banks, although uncertainties surrounding the impact of the new virus variant could stoke demand for haven assets. The World Health Organization is concerned that omicron is being dismissed as mild, even as it spreads at a faster rate than any previous strain of Covid-19.

Spot gold was down 0.2% to $1,776.92 an ounce at 12:13 p.m. in New York after dropping 0.9% Tuesday. The Bloomberg Dollar Spot Index rose 0.1%, following a 0.3% rise in the previous session. Silver and platinum declined, while palladium fell to trade near the lowest since March 2020. 

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