On Monday, Gold hovered at around $1,750 levels as traders waited for an update on Fed’s insights into their monetary policy.
On Thursday, Fed is expected to release details regarding their previous meeting, which the traders believe could give more clarity into the central bank’s plans for interest rates.
Although the market expects a smaller rate hike for December following the unexpected easing of inflation in recent months, the Fed’s recent comments suggested otherwise, saying that interest rates hikes might continue at their pace for a while longer.
This possibility of a sharp rate hike will positively impact US treasury yields and the dollar but will instead weigh on the metals.
After a series of losses, the greenback finally found its footing on Monday, rising 0.1%, while spot gold fell flat at $1,749.53 per ounce and gold futures stalled at about $1,751.90.
While metals rallied earlier this month, with gold topping $1791.80 last week, prices are now in retreat as traders look for a hike break and supportive data confirming inflation’s easing.
Bullard Comments Killed the Gold Rally
Another factor that affected gold’s price is the recent comments from the Federal Reserve Bank’s CEO, James Bullard, saying that the only way to bring inflation back to 2% is through a higher-for-longer interest rate hike.
According to Bullard, “While the policy rate has increased substantially this year, it has not yet reached a level that could be justified as sufficiently restrictive, according to this analysis, even with the generous assumptions.”
“To attain a sufficiently restrictive level, the policy rate will need to be increased further,” Bullard added.
However, Bullard did not give any specific details on what the future rates would be.
Chief market strategist at Blue Line Futures commented, “Like most, I was expecting a clear break above $1,800. But that didn’t come, and it probably won’t after what Bullard said.”