Gold futures on Thursday were headed sharply higher as the U.S. dollar weakened, even though the Federal Reserve indicated Wednesday that the central bank may taper its bond-buying programs in coming months and demand for gold fell in a report from the World Gold Council.

The central bank, however, underscored that policy makers required more economic improvement before moving definitely toward tapering.

Following the statement Wednesday, Jeff Wright, chief investment officer at Wolfpack Capital, said there was nothing new to add to the narrative from the Fed. “Tapering will happen but no time frame, rates are set until late 2022,” and inflation is transitory, “which almost nobody actually believes,” he told MarketWatch.  

During the press conference that followed the statement, Fed Chairman Jerome Powell said the Federal Open Market Committee had a deep dive into how and when to taper and said an announcement on when to start a tapering program would depend on the data.

Read: Fed says economy has ‘made progress’ toward standards for tapering, but not enough to start yet

The gold market now has a “trifecta of economic catalysts” that could push gold higher, said Wright on Thursday. Those are a dovish FOMC statement, U.S. weekly jobless claims above consensus with continuing claims also above estimates, and U.S. gross domestic product expanding at a 6.5% annual pace in the second quarter.

The GDP reading missed expectations for a 9.1% growth forecast by economists polled by The Wall Street Journal. The GDP data was “disappointing,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update. However, the silver lining to this is the “Fed’s support will not be leaving the town anytime soon,” prompting traders to keep risk on sentiment, he said.

Meanwhile, Wright said he believes gold will struggle to break out past $1,850 without a further push from economic data or outside events and that “profit taking will also become a factor at some point.” 

The most-active December gold contract
GCZ21,
+1.56%

rose $27, or 1.5%, at $1,831.60 an ounce. Based on the most-active contracts, prices were poised for their strongest one-day percentage rise since May 17 and highest settlement since mid-June, FactSet data show.

Losses in the dollar Thursday also helped to support dollar-denominated prices of gold, wrote Ricardo Evangelista, senior analyst at ActivTrades, in a note.

The dollar was down 0.3% on Thursday, as gauged by the ICE U.S. Dollar Index
DXY,
-0.43%
,
and the 10-year Treasury note
TMUBMUSD10Y,
1.270%

was yielding 1.27%.

The greenback’s weakness resulted from dovish comments made by the Fed’s, who “pushed back on the timing of rate hikes and asset purchases tapering, highlighting concerns over the state of the labour market,” wrote Evangelista.

“Such remarks create a bearish outlook for the American currency, which lead to immediate gains for gold,” said the ActivTrades analyst.

Gold also gained traction on Thursday despite a report from the World Gold Council that indicated global gold demand declined in the first half of 2021 from the same period in 2020, as investment in the precious metal dropped by 60%.

In the first six months of this year, world gold demand, excluding over-the-counter trades, totaled 1,833.1 metric tons, down 10% year on year, the report said. The investment segment of gold demand in the first half of the year, which includes bars and coins and gold-backed exchange-traded funds (ETFs), totaled 455.9 metric tons, down 60% from the same period a year earlier, 

In other metals trading, September silver
SIU21,
+3.85%

SI00,
+3.85%

rose by 86.3 cents, or 3.5%, at $25.74 an ounce, after rising 0.9% on Wednesday.

September copper
HGU21,
+0.89%

rose 0.9% to $4.52 a pound. October platinum
PLV21,
+0.93%

added 0.7% to $1,065.40 an ounce and September
PAU21,
+1.60%

traded at $2,665 an ounce, up 1.6%.

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