Gold Rises After Fed Official Plays Down Rate Hike Prospects
(Bloomberg) -- Gold rose for a second day following commentary from a Federal Reserve official that played down the possibility of imminent rate hikes.
Governor Christopher Waller said Tuesday the Fed should begin tapering its bond-buying program next month, though interest-rate increases are probably “still some time off.” Upcoming speeches and discussions by officials including Randal Quarles, Mary Daly and Chair Jerome Powell will also be keenly watched ahead of the central bank’s meeting next month.
Bullion has fluctuated recently as traders attempt to gauge the pace at which pandemic-era stimulus will be reined in by central banks. Ongoing inflation, driven by high energy prices and snarled supply chains sparked concerns rate hikes could come sooner than expected, a painful prospect for gold. But recent mixed economic data from the U.S. has raised doubts among investors about an early hike, which weakens the dollar and raises commodity prices.
Hedge fund manager Paul Tudor Jones said it’s time to double down on inflation hedges, including commodities, in a Wednesday interview for CNBC.
“What they’re telling you by their actions, is that they’re going to be slow and late to fight inflation,” the founder and chief investment officer of Tudor Investment Corporation said. Tudor Jones also advised investors not to hold bonds due to increasing signals that the Fed will not be quick to fight inflation.
The Bloomberg Dollar Spot Index dropped 0.3% and spot gold climbed 1% to $1,786.33 an ounce at 2:51 p.m in New York. Bullion for December delivery rose 0.8% to settle at $1,784.90 an ounce on the Comex. Silver and platinum also advanced, while palladium fell. Bond yields fell.
Analysts expect gold to face downward pressures as soon as the Fed starts reining in its monetary stimulus.
“Gold is trading above what we deem as fair value at this moment, and I believe this premium is due to the market pricing inflation fears,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “With the Fed due to begin monetary normalization, I still believe gold will face more downward pressure in the coming year.”
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