On Friday (October 21), the international gold price continued to hit a new low of $1,617.12 per ounce since September 28, as strong labor market data and hawkish remarks from Fed officials weakened the appeal of gold, and the 10-year U.S. Treasury bond yields The rate hit a record high since June 2008.
At 15:21 Beijing time, spot gold fell 0.49% to US$1,619.63 per ounce; the main COMEX gold futures contract fell 0.81% to US$1,623.5 per ounce; the US dollar index rose 0.14% to 112.986.
Stephen Innes, managing partner at SPI Asset Management, said: “The Fed’s tightening cycle is only halfway through, rates may have more room to rise, and gold may continue to fall.” He added that the market will continue to pay close attention to inflation and employment data, if The Fed is expected to suspend interest rate hikes ahead of schedule, which will push gold prices higher.
Data released overnight showed the number of Americans filing for unemployment benefits fell last week, suggesting the labor market remains tight. Separate data showed U.S. existing home sales fell for the eighth straight month in September.
Fed Governor Tim Cook said inflation pressures were unacceptably high and more rate hikes were needed to curb inflation. She further added that interest rate hikes will continue in the future, after which restrictive monetary policy will remain.
Philadelphia Fed President Harker hinted that the central bank will “continue to raise interest rates for some time” to keep inflation in check, prompting investors to brace for another outsized rate hike by the central bank at its upcoming November policy meeting.
In his speech, Harker warned that while inflation has soared very quickly, it will take time to lower it, creating uncertainty for monetary policy. If inflation doesn’t cool, next year “we can tighten further based on the data. What we really need to see as policy makers is a sustained decline in some inflation measures before we ease monetary tightening.”
All in all, gold is likely to extend its recent weakness, but the lack of major data/events may limit downside. Next week Fed policymakers will enter a period of silence ahead of their November policy meeting.