On Tuesday (November 15), the international gold price once again refreshed a three-month high to around $1,776.40 an ounce, supported by the loosening of expectations for the Fed’s aggressive interest rate hike policy. The dollar index was not far from a near three-month low of 106.28 hit last week.
At 15:23 Beijing time, spot gold rose 0.15% to US$1,773.85 per ounce; the main COMEX gold futures contract rose 0.02% to US$1,777.3 per ounce; the US dollar index fell 0.34% to 106.522.
Gold has gained $150 since falling to a one-month low earlier this month on data showing U.S. unemployment rose in October, signs of cooling inflation and expectations the Federal Reserve will ease aggressively hawkish policy. Traders now see the Fed raising rates by at least 50 basis points at its December meeting, but less than a 20 percent chance of a fifth straight 75 basis point hike.
Clifford Bennett, chief economist at ACY Securities, said: “Gold has risen strongly from around $1,610 an ounce, and the catalyst is mainly a downward correction in the dollar. Gold prices will face some short-term consolidation, but the overall key risk remains very skewed to the upside.”
The Fed is balancing what it sees as the need to curb household and business spending and credit in an attempt to reduce inflation, that if financial conditions tighten too quickly and too far, it could trigger a sharper slowdown than needed and even push the U.S. into a recession.
But the latest comments from Fed policymakers suggest the central bank is unlikely to change its current stance, as its main goal is to control inflation. Core U.S. inflation remains more than triple the 2 percent target.
Federal Reserve Vice Chairman Brainard said on Monday (November 14) that the Fed may soon slow the pace of interest rate hikes, but stressed that the central bank still has more work to do. She noted that the slowdown in headline inflation, and commodity prices in particular, was reassuring, but so far, many economic indicators have shown continued strength, especially hiring.
Brainard and other officials agreed that they need to see the pace of price change continue to slow so the Fed can get the situation under control. She also noted that some key components of the price index, such as rents, may not peak until “into next year”.