Federal Reserve Chair Janet Yellen speaking from Jackson Hole indicated that the USA central bank was nearing the point of raising the short-term Fed Funds rate once again, possibly at their September meeting.
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The case for a U.S. rate hike has strengthened in recent months, with a lot of new jobs being created, and economic growth looks likely to continue at a moderate pace, Yellen said in a speech at the Fed’s annual monetary policy conference in Jackson Hole, Wyoming, on Friday.
The symposium, in Grand Teton National Park and held each year since 1978, attracts central bankers from around the world and notables such as former Fed chairman Ben Bernanke, who twice used the venue to signal unconventional policies.
“The pressure on gold will likely increase as we go into September, as participants are now more willing to bet on a rate hike given what they have gleaned from top Fed officials on Friday”, INTL FCStone said in a note.
The market is now pricing in a 33% probability for a rate hike at the September Fed meeting and an nearly 60% chance for it happening in December, according to the CME Group FedWatch tool.
The chances of a hike in September has grown to 33% in the wake of the Fed Chair’s comments, from a previous 21% reported on Thursday, according to CME Group’s FedWatch tool.
Oil prices are “off to a weak start as attention has shifted toward a stronger Us dollar that, in turn, has emanated from Friday’s suggestion of a rate hike”, said energy-advisory firm Ritterbusch & Associates in a note.
Spot gold touched its lowest since July 26 at $1,314.70, and was down 0.1 percent at $1,319.81 an ounce at 1135 GMT.
“As long as the dollar remains below the assumed level, the stock market can hardly stage a full-fledged rally”, he added. S&P 500 futures were down 0.1 percent to 2,166.50. The dollar extended Friday’s gains and reached a roughly three-week high against the yen of 102.39 yen. The later session saw stocks falling again as expectations of investors for a rise in rates became a possibility later this year. “It is of no doubt that the rate hike expectations have gone up for the year ahead”, said OCBC Bank analyst Barnabas Gan. Higher stocks and a rising U.S. Dollar also pressured the dollar-denominated December Comex Gold contract.
West Texas Intermediate fell 1.3 percent to $47.04 and Brent shed 1.2 percent to $49.30.
The dollar climbed to an early high of $1.1157 against the Euro Monday, but has since retreated to around $1.1190. The yield on the 10-year Treasury note fell to 1.56 percent from 1.63 percent. She described consumer spending as “solid” but noted that United States business investment was weak and exports hurt by a strong dollar.
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Gold’s volatility tracked fluctuations in the U.S. dollar.
