Gold slips as investors assess hawkish Fed comments, await U.S. inflation data
Gold prices go on a light drop on Tuesday as investors focused on the US inflation data that came forward, weighing the hockey statements at the interest rates of the Federal Reserve, giving further signals about the Central Bank’s monetary policy approach
05: 55 SPOT GOLD AT ET (10: 55 GMT) 1.6% FELL BY $4,073.09 PER OUNCE, WHILE US GOLD FUTURES DROPPED 0.8% TO $4,081.45 PER OUNCE. THE US DOLLAR INDEX, WHICH TRACKS THE DOLLAR AGAINST A BASKET OF MULTIPLE CURRENCIES, GREW AT 0.1% TO 101.71
Gold gained an edge of 1.7% on Monday and saw about 5% bounce last week, with the latest rally moved prices to $4,130. Oil prices fell below $90 per barrel for the first time after August, as Democrats in the mid-term elections of the last week acquired the control of the Congress, leading to the hope of potential success in the US-Iran peace negotiations
This year the gold and oil are generally moved to the opposite direction. The rising prices of energy promoted inflation and strengthened the expectations of strict monetary policy, thereby adversely affecting gold as gold does not give interest income
The decline in recent crude oil prices reduced this pressure to some extent. Weaker Dollar also supported gold as it makes gold cheaper for traders investing in other currencies
Additional surges in the future can prevent the inflation concerns of the Federal Reserve. Fed authorities have continued to emphasize the need to bring prices under control, while traders are making high chances of another interest rate increase in December. Speaking in London on Tuesday, the Fed Governor Christopher Werler said that if the inflation data is relatively cold, there is a support to increase rates, and if the data came hot, a deep growth of half points can also be appropriate
RICHMOND FED PRESIDENT TOM BARKIN AND CHICAGO FED PRESIDENT AUSTIN GUOLSBY ALSO HIGHLIGHTED THE RESILIENCE OF THE US ECONOMY AND THE INFLATION PRESSURE SUSTAINED, WHICH CAN KEEP THE MONETARY POLICY STRICT. ACCORDING TO THE CME FEDWATCH, TRADERS ARE NOW ADDING A RATE RISE OF ABOUT A QUARTER OF POINTS IN DECEMBER TO THE PRICE, ALLOWING THE FED FUNDS TO REACH A RANGE OF 4% TO 4.25%
(Research Nair contributed to reporting)
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Conclusions for gold traders:
At present gold prices are under pressure due to the hocish signs and inflation data of the Fed; The dollar weakness gives some support, but the potential interest rate in December can further limit growth prices, so traders should be alert