In data, the US CPI month-over-month in August at 0.2 percent was better than the expected 0.1 percent.
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United States interest rate futures indicate that expectations of a rate increase next week remain low, but the dollar could benefit from anything in the Fed’s statement that hints at a hike before the end of the year.
JOHANNESBURG -The rand weakened on Friday as the dollar firmed after data showing faster-than-expected growth in USA consumer inflation supported the case for the Federal Reserve to raise interest rates later this year.
Gold is highly sensitive to rising interest rates, which would lift the opportunity cost of holding non-yielding assets. “We are expecting prices to be volatile especially with the Fed meeting next week”. Bullion is on track to end the week down about 1 percent.
Comex gold for December delivery declined $3.80 or 0.3 percent to $1,314.20 per ounce, its lowest since August 30. The central bank eased monetary policy last month but is expected to refrain from further moves amid signs that it overestimated the initial shock to Britain’s economy from June’s vote to leave the European Union. Spot gold was up 0.2 percent at $1,316.30 an ounce by 0052 GMT, but was on track to end the week down almost 1 percent. Futures markets have priced in stronger odds for a December U.S. rate increase.
“It was an unpleasant surprise to people who were bullish”, Tai Wong, head of base and precious metals trading at BMO Capital Markets, told the Journal.
“Though down on the week, gold prices have lifted today, with a slew of disappointing data out of the USA overnight has all but ruled out any pre-election rate hike moves from the Fed”, Jordan Eliseo, chief economist at Australian Bullion Co, said in an e-mail.
“Things are largely on hold ahead of the Fed and Bank of Japan meetings next week”, said Mitsubishi analyst Jonathan Butler.
The Bank of Japan will conduct a comprehensive review of its stimulus programme after failing to reach its 2 percent inflation target.
The Labor Department said its consumer price index rose by 0.2 percent in August after coming in unchanged in July.
EUR/USD edged down 0.12% to 1.1230. The probability of a hike dropped to 18 per cent from 22 per cent at the beginning of the week, futures prices indicate.
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Palladium was up 0.2% at $655.72 an ounce.
