Gold prices slid on Monday and hit a two-week low as upbeat comments from Federal Reserve officials on the US economy boosted expectations that the central bank could lift interest rates sooner rather than later. Fed Vice Chairman Stanley Fischer on Sunday gave an upbeat assessment of the USA economy’s current strength, saying that the central bank is close to hitting its job and inflation targets.
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Fischer’s remarks come less than a week before Fed Chair Janet Yellen speaks on August 26 at an annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming. Wall Street was vulnerable to losses on Friday and may follow this negative path if the bearish domino from Asia and Europe entices sellers to attack.
To take note of in that regard, some market commentary on Monday was again calling attention to the price of funds on the interbank market in the wake of the previous Friday’s fixing for the three-month USA dollar London Interbank Offered Rate at 0.81711%, which marked its first weekly decline since June.
“The tone of Fischer’s comments clearly tilted hawkish and, all else equal, increases the probability that a September rate hike may be more firmly on the table than what the financial markets expects”, said Sam Bullard, senior economist at Wells Fargo Securities.
Asian shares concluded mixed with the Nikkei edging higher following Yen’s weakness which provided exporters in Japan a welcome boost.
It skidded 2.2 percent last week, as the dollar dipped below 100 yen.
“While no one seriously expects the Federal Reserve to act on rates next month, some Fed officials seem extremely keen to try and keep the option on the table”, Michael Hewson, chief market strategist at CMC Markets in London, said in a note.
The Japanese yen traded comparatively weaker against the greenback, at levels near 100.70 as of 8:31 a.m. HK/SIN, compared with the 99 handle it reached in the previous week. “The Fed has left the markets more confused than ever, in our opinion, and it is likely that the speech by chair Yellen at the Jackson Hole event will be more long- term focused and not provide enough clarity on the next hike”.
“Fischer didn’t necessarily state when the Fed has made a decision to hike rates, but his remarks seemed to be alluding that a rate hike might be ’round the corner”, said Craig Erlam, a senior market analyst at OANDA.
Crude oil futures dropped, giving back some of their recent gains that propelled oil into bull market territory, after technicals had it in a bear market early this month.
ENERGY: Benchmark U.S. crude shed 62 cents to $48.48 per barrel in electronic trading on the New York Mercantile Exchange.
Emerging stocks and currencies also fell broadly on Monday.
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Platinum was down 0.2 percent at $1,105, while palladium was 0.3 percent lower at $705.65.
