The dollar rose 0.2 percent against a basket of six major currencies.
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The Fed should “soon” be ready to raise interest rates as USA central bankers grow confident that low inflation will rebound and that employment remains stable, William Dudley, the influential head of the NY Fed, said on Friday.
Gold was stuck at $1,076.11 an ounce having touched its lowest level in almost six years.
Gold for December delivery on the Comex division of the NY Mercantile Exchange shed $4.40, or 0.41%, to trade at $1,071.90 a troy ounce during European morning hours.
The Fed is widely seen increasing its benchmark overnight interest rate at its December 15-16 policy meeting, and the debate is already shifting to the pace of rate hikes going forward.
That comes in a truncated trading week with United States markets closed for the Thanksgiving Holiday on Thursday, pushing USA economic data to a Wednesday release.
The main question is how prepared emerging market central banks are for a Fed rate hike and how much the Fed actually ends up hiking beyond the first quarter-point rise.
But Williams did stress that the rate hike will be gradual, and will not be done in the same incremental manner that was a main feature of the Fed’s last policy-tightening regimen, when rates were increased by 0.25 percent per meeting.
There exists a strong case for the U.S. Federal Reserve to start raising its short-term interest rates during December, if there continue to be encouraging indicators for the economy in the USA, said John Williams the President of the San Francisco branch of the bank. “This time around, the expected monetary policy shift is likely to further boost the greenback, making dollar-denominated gold futures more expensive for buyers who use other currencies to fund their purchases”, according to Barron’s.
“The strengthening USA dollar along with the rising Treasury yields have increased the cost of carry for all precious metals, and has convinced inventory holders to be increasingly willing to part with their hoard”, TD Securities said in a note.
Evidence of the USA dollar’s effect on the economy includes making US-produced goods less attractive in overseas markets.
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Across the Tasman, the Australian dollar was higher yesterday, getting support from expectations the Reserve Bank of Australia would not be cutting the cash rate below 2%.
