Hawkish Comments from Fed Governor Push Gold Prices Lower

As this week started, gold extended its losses after Christopher Waller, a Federal Reserve Governor, made hawkish comments that had been unexpected. He suggested that it was likely for the Fed to increase benchmark lending rates just as it was likely for the institution to lower rates during its next sitting. 

Markets reacted promptly to these comments and gold prices slid by at least 3%. Bullion was priced at $3,994 an ounce as the week’s trading started. 

The CME FedWatch Tool indicated a 45% likelihood of a rate hike in July. This was a sharp rise from the 35% chance that had been priced in prior to these hawkish statements. Traders gave a rate increase a 50% chance, a marked shift from the prior expectation of a rate cut. 

Waller observed that the labor market was currently not a source of any inflationary pressure since it was very strong, close to its maximum anticipated capacity. However, he noted that inflationary pressures were arising from increased levels of consumption within the economy, elevated energy prices due to the conflict in the Middle East, and the tariff policies around the world, especially in the U.S. 

Gold prices retreated in the wake of these comments because higher lending rates make bullion less appealing to investors due to its non-yielding nature. Additionally, higher rates boost dollar strength, and that makes gold more costly for buyers who hold foreign currencies. 

Traders then awaited CPI data that was released a day after Waller’s comments. Fortunately, the data showed that while markets expected CPI to be in the region of 3.8%, the report indicated that the annualized CPI of the U.S. had cooled modestly to 3.5%. This somewhat eased expectations of a rate hike since a higher figure would have strengthened the case for monetary tightening. 

Of concern is the PCE, which stands at 4.1%. This is much higher than the Fed’s target of 2%, and that situation is keeping analysts and markets concerned because it keeps the prospect of rate hikes hovering over commodity markets. 

The macroeconomic picture is currently playing a major role in determining gold prices on global markets while the fundamentals of the market are taking a backseat. With a shaky truce on the brink of collapse after strikes and counter-strikes intensified between the U.S. and Iran over recent days, analysts at firms like Collective Mining Ltd. (NYSE American: CNL) (TSX: CNL) linked to precious metals are going to have very busy days over the coming weeks. 

About MiningNewsWire

MiningNewsWire (“MNW”) is a specialized communications platform with a focus on developments and opportunities in the Global Mining and Resources sectors. It is one of 75+ brands within the Dynamic Brand Portfolio @ IBN that delivers: (1) access to a vast network of wire solutions via InvestorWire to efficiently and effectively reach a myriad of target markets, demographics and diverse industries; (2) article and editorial syndication to 5,000+ outlets; (3) enhanced press release enhancement to ensure maximum impact; (4) social media distribution via IBN to millions of social media followers; and (5) a full array of tailored corporate communications solutions. With broad reach and a seasoned team of contributing journalists and writers, MNW is uniquely positioned to best serve private and public companies that want to reach a wide audience of investors, influencers, consumers, journalists and the general public. By cutting through the overload of information in today’s market, MNW brings its clients unparalleled recognition and brand awareness.

MNW is where breaking news, insightful content and actionable information converge.

To receive SMS alerts from MiningNewsWire, text “BigHole” to 888-902-4192 (U.S. Mobile Phones Only)

For more information, please visit https://www.MiningNewsWire.com

Please see full terms of use and disclaimers on the MiningNewsWire website applicable to all content provided by MNW, wherever published or re-published: https://www.MiningNewsWire.com/Disclaimer

MiningNewsWire
Austin, Texas
www.MiningNewsWire.com
512.354.7000 Office
Editor@MiningNewsWire.com

MiningNewsWire is powered by IBN