A rate hike would likely see the price of gold fall as it increases the opportunity cost of bullion, which doesn’t pay any interest or a dividend, while also boosting the dollar which tends to pull in the opposite direction to the yellow metal.
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Even with the US’ positive economic outlook, which Atlanta Fed President Dennis Lockhart also said is expected to “accelerate” in the second half of this year and next year, justifying a rate hike in September, analysts say that the USA central bank may keep the rate steady for the time being given its low inflation rate, along with external uncertainties on Brexit and a slowdown in China.
The odds of an interest-rate increase at the September 20-21 meeting of the Federal Open Market Committee are about 22 percent, according to pricing in federal funds futures, with the probability of a hike by December at 50 percent. “As I have emphasized, with the employment box checked, the key impediment to further normalization of rates is inflation, which remains well below the Fed’s 2 percent target“, Stanley wrote. It sent the Dow Jones Industrial down more than 84 points at 18,552.02 on Tuesday. A decrease in gasoline and grocery prices eased inflation in the US.
Several officials wanted to delay the rate increase until they see a clear indicator that inflation would jump to the Fed’s two percent target, while for others, the USA economy was close to achieving a full recovery on employment and a rate hike may soon be necessary to prevent the economy from overheating.
Platinum rose 0.5 percent to $1,118.50, after hitting a three-week low of $1,099.74 in the previous session, while palladium was up 1.1 percent at $699.50.
Copper for September delivery on the Comex division of the New York Mercantile Exchange ticked down 1.35 or 0.6 percent to $2.1585 per pound.
The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.58 percent at 94.170 after touching a almost eight-week low of 94.141.
Dudley on Thursday reinforced his message on the broader economy being on track.
“The focus of the day is on the US July CPI”.
A weaker dollar also supported crude prices, as did the loss of more than 700,000 barrels per day in Nigerian output lost to militant attacks and pipeline problems.
Gold slipped down 0.7% from yesterday’s high of $1358.10 per ounce to $1348.41.
“Nobody would be willing to sell gold aggressively even if there is a hike in rates, with the USA presidential elections in November creating uncertainty”, said Yuichi Ikemizu, head of commodity trading at Standard Bank in Tokyo.
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