Sunday, 17 December, 2017

Gold Prices Fall as The Fed Signals Another Rate Hike This Year

Federal Reserve Bank of Chicago President Charles Evans speaks during a meeting in Madrid Spain US stocks open higher in rebound from recent dip
Madeline Patrick | 28 September, 2017, 00:32

As of late Wednesday morning, spot gold was around $1,286 an ounce.

Ellen Zentner, chief economist at Morgan Stanley, says her biggest takeaway from the Cleveland speech was Yellen's confidence that "a strong US labor market would ultimately drive inflation closer to the Fed's two percent goal over the next few years".

According to Yellen, this uncertainty surrounding inflation "reflects the influence of unexpected movements in oil prices and the foreign exchange value of the dollar, as well as that of idiosyncratic developments unrelated to broader economic conditions".

On the economic front, USA new orders for manufactured durable goods in August increased 3.9 billion us dollars, or 1.7 percent, to 232.8 billion dollars, beating market consensus, the Commerce Department announced Wednesday.

Rabobank strategists say that if the tax reforms raises the chances of the USA sustaining a 3 percent growth rate, then it will be a significant boost for the dollar which has suffered this year and is poised for its biggest annual drop since 2004. The tax reform plans are set to be announced on Wednesday.

Hopes were also raised of lower United States corporation and individual taxes after President Donald Trump hosted a bipartisan round table discussion on tax policy at the White House.

US stocks ended mixed overnight as housing and consumer confidence data disappointed investors and Fed Chair Yellen cautioned against moving too slowly on interest rates.

Yellen's comments were in sync with earlier remarks by New York Fed President William Dudley, who said on Monday he expects rates to continue rising gradually.

Toppled trees, lashings of rain as Hurricane Maria batters Puerto Rico
Dailey noted that her house on the island lost its roof, as did the official residence of the prime minister, Roosevelt Skeritt. People take shelter at Roberto Clemente Coliseum in San Juan, Puerto Rico, during the passage of the Hurricane Maria .

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.

-Spanish Prime Minister Mariano Rajoy will meet U.S. President Donald Trump in Washington Tuesday while his team back in Madrid attempts to turn the screws on a secessionist push in Catalonia.

Traders of short-term interest-rate futures see about a 76 percent chance of a December rate hike, but are betting on only one rate hike next year. The S&P 500 closed a fraction of a point higher at 2,496.84, with eight of the 11 main sectors ending lower.

The Euro-to-Dollar rate pared a 0.68% loss overhanging from the London session to trade just 0.52% down at 1.1794.

"The divergence between USA and euro zone data surprises is closing rapidly and while the once popular dollar parity forecasts still look ridiculous, the euro looks past its peak", said Sean Maher, an independent macro-strategist based in London.

-The MSCI Emerging Market index sank 0.8 percent to the lowest in more than a month. The euro fell to $1.1788 from $1.1791. German 10-year benchmark yields rose 6 basis points to 0.47 percent.

The dollar was higher against the yen, trading at 112.34.

In other commodities, the Brent crude oil spot price gained 0.14% to $58.61 per barrel as of 04:35 BST.

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