2020.06.1019:04:00UTC+00Gold Settles Slightly Lower For The Session, But Rises After Fed Policy Announcement

Gold futures settled lower on Wednesday, failing to hold early gains, as traders stayed largely cautious ahead of the Federal Reserve's monetary policy announcement.

Gold's early gains were due to lingering uncertainty about global growth amid the impact of the coronavirus outbreak and possibility of a second wave of attack later this year.

The Organization for Economic Cooperation and Development (OECD) said on Tuesday that it expects the global economy to contract by 6% this year even if there is no second wave of coronavirus infections. However, in the event of a second attack, the economy could contract 7.6% this year, it said.

Gold futures for August ended down $1.20 or less than 0.1% at $1.720.70 an ounce, after having moved past $1,730.00 an ounce earlier in the session.

Prices edged higher after the session, after the Fed indicated that interest rates will remain near zero till at least 2022. Gold futures rose to $1,739.00 before easing a bit to $1,735.10 an ounce subsequently.

Silver futures for July ended up marginally at $17.796 an ounce, while Copper futures for July settled at $2.6565, gaining $0.0575 for the session.

The Fed, which maintained the target range for the federal funds rate at zero to 0.25% as widely expected, indicated that interest rates are likely to remain at current near-zero levels through 2022.

The central bank expects the U.S. economy to rebound in 2021 following a sharp contraction this year due to the coronavirus pandemic. The accompanying statement also reiterated that the Fed expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.

The economic projections provided along with the statement showed most Fed officials expect rates to remain at current levels through 2022, with only a couple predicting an increase in rates.

Expectations that rates will remain at record lows come as the Fed projects real GDP to nosedive by 6.5% in 2020, as the ongoing public health crisis weighs heavily on economic activity.

However, the Fed's projections call for real GDP to rebound by 5% in 2021 followed by a 3.5% jump in 2022. The unemployment rate is expected to spike to 9.3% in 2020 before pulling back to 6.5% in 2021 and 5.5% the next year.

Regarding the Fed's asset purchase program, the central bank said it plans to increase its bond holdings at least at the current pace over the coming months but noted it remains prepared to adjust its plans as appropriate.