Comments by U.S. Federal Reserve (Fed) Board Member Christopher Waller regarding the December meeting have brought interest rate expectations back to the forefront in global markets. Waller stated that he could support an interest rate hike even if a slowdown in inflation is observed.
Waller's message strengthened the perception that the Fed may maintain a hawkish stance in its monetary policy in the near term rather than easing. This expectation created pressure on gold, which does not provide interest yields.
TIGHTENING MESSAGE FROM WALLER
Waller stated that even if October inflation shows improvement compared to September, he could support a 25 basis point interest rate hike at the Federal Open Market Committee (FOMC) meeting in December.
The possibility of a stronger move also stood out in the Fed official's remarks. It was noted that a 50 basis point hike could also be considered if core consumer inflation comes in at 0.3 percent or higher on a monthly basis.
INTEREST RATE PRESSURE ON GOLD
The strengthening possibility of an interest rate hike brought about an upward movement in the dollar and U.S. bond yields. This picture increased selling pressure on gold prices despite investors' demand for safe havens.
According to market data reported by Reuters, after October inflation exceeded expectations, spot gold fell 2 percent to the 4,057 dollar level. During the same period, the dollar index rose 0.3 percent.
The U.S. 2-year bond yield rose 13 basis points to 4.68 percent, while the 10-year bond yield rose 7.6 basis points to 4.94 percent. The change in interest rate expectations is being closely monitored across a wide range, including stock markets and cryptocurrency markets.
The focus of the markets has now turned to the magnitude of the step the Fed will take at its December meeting. The decision is expected to be decisive for the short-term direction of the dollar, bonds, and risky assets, especially gold.
News Source: 12punto
