The rise of international gold prices is limited by the strengthening of the U.S. dollar, and the IMF hints that the U.S. does not respond well to inflation. Provider FX678

On Friday (November 19), international gold prices remained firm, as concerns about longer-lasting inflation have enhanced the attractiveness of gold as an inflation hedging tool. But the prospect of a possible early interest rate hike by the Fed boosted the dollar and limited the price of gold.

At 14:52 Beijing time, spot gold rose by 0.06% to US$1,860.11 per ounce; the main COMEX gold contract rose by 0.01% to US$1,861.6 per ounce; the US dollar index rose by 0.09% to 95.610.

Earlier this week, the price of gold climbed to the highest level in more than five months, as the accelerated rise in consumer prices in the United States in October exacerbated concerns that inflation will last longer. But a stronger U.S. dollar raises the cost of buying gold for buyers who hold other currencies.

As inflation continues to soar and the economy accelerates, Fed policy officials are considering the possibility of raising interest rates earlier than they expected a few months ago. Rising interest rates increase the opportunity cost of holding non-yielding gold and reduce the attractiveness of gold.

DailyFX’s foreign exchange strategist Ilya Spivak said: “Gold has risen in tandem with the U.S. dollar and yields. This unusual trend shows that the market believes that the Fed is not hawkish enough. This keeps inflation expectations high and real yields low, which supports gold prices. .”

Spivak said: “Due to the market’s concern about interest rate hikes and their impact on inflation, the recent price trend of gold is very sensitive to next week’s personal consumption expenditure (PCE) price index and other economic data.” He added that in view of the eventual shift In the interest rate hike environment, the overall trend of gold is still falling.

The International Monetary Fund (IMF) said on Thursday that U.S. inflation is expected to fall back in 2022, but considering the upside risks of inflation, policymakers should remain vigilant. If supply chain disruption continues or inflation expectations are disengaged, inflation in parts of the world may become “more durable.”

IMF spokesperson Gerry Rice said at a regular briefing: “U.S. inflation continues to be high, and it may be necessary to adopt more strong policy responses, which will have a systemic downward impact on the U.S. and global economy.”

The U.S. Congressional Budget Office (CBO) said on Thursday that President Biden’s $1.75 trillion comprehensive domestic spending bill did not generate enough revenue to cover costs. This conclusion may weaken the confidence of moderate Democrats and threaten the passage of the bill.

But U.S. Secretary of the Treasury Yellen insisted that the US$1.75 trillion Social Security and Climate Expenditure Act can “break-even.” She said that after combining the estimates of the Congressional Budget Office, the Congressional Taxation Joint Committee, and the Department of the Treasury, she believes that the $1.75 trillion Social Security and Climate Expenditure Act will be able to “break-even.”