Gold is trading at 1252.70 falling 1.51% this week as the Federal Reserve turned hawkish and put rate increases back on the schedule. Gold steadied after
Gold is trading at 1252.70 falling 1.51% this week as the Federal Reserve turned hawkish and put rate increases back on the schedule. Gold steadied after two days of losses on Friday, but was on track for its biggest weekly slide in eight weeks on the back of a firmer dollar and indications from the U.S. Federal Reserve that it could raise interest raise rates as early as June.
The U.S. economy could be strong enough to warrant an interest rate increase in June or July, New York Federal Reserve President William Dudley said on Thursday, cementing Wall Street´s view that the Fed will tighten policy soon.
That came a day after the minutes of the Fed’s April meeting revealed that most policymakers felt a rate increase might be appropriate as early as next month, sending gold to a three-week low of $1,244. It has since bounced back, as ultra-low yields and concerns over economic growth lent support.
“Those minutes from the last FOMC meeting I think really gave quite a bit of light to the possibility for that June rate hike,” said Phillip Strebler, senior commodities broker at R.J. O’Brien in Chicago.
“I think that the Fed is now challenged and the market is getting more confident that it’s going to happen, provided that the data supports it.”
Gold is highly sensitive to interest rates, gains in which lift the opportunity cost of holding non-yielding bullion. The metal has rallied 18 percent this year as investors bet the Fed would hold off from further increases.
The dollar retreated from its highest in nearly two months against a currency basket, but cruised to its third week of gains, keeping up pressure on gold.
“The gold environment now is substantially different from what was apparent several weeks ago, when a weaker dollar and a benign rate environment were providing an element of support,” INTL FCStone said in a report. “This is no longer the case.”
Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, rose by 4.5 tonnes on Thursday to their highest since November 2013.
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Major Economic Events for the week:
Cur. | Event | Actual | Forecast | Previous | |||||
Monday, May 23, 2016 | |||||||||
Canada – Victoria Day | |||||||||
Tuesday, May 24, 2016 | |||||||||
USD | New Home Sales (Apr) | 523K | 511K | ||||||
Wednesday, May 25, 2016 | |||||||||
CAD | Interest Rate Decision | 0.50% | 0.50% | ||||||
USD | Crude Oil Inventories | 1.310M | |||||||
Thursday, May 26, 2016 | |||||||||
GBP | GDP (QoQ) (Q1) | 0.4% | 0.4% | ||||||
GBP | GDP (YoY) (Q1) | 2.1% | 2.1% | ||||||
USD | Core Durable Goods Orders (MoM) (Apr) | 0.3% | -0.2% | ||||||
USD | Pending Home Sales (MoM) (Apr) | 0.6% | 1.4% | ||||||
Friday, May 27, 2016 | |||||||||
USD | GDP (QoQ) (Q1) | 0.9% | 0.5% | ||||||
Upcoming Government Bond Auctions
Date Time Country
May 23 N/A UK Syndicated tap of 0.125% I/L 2046 Gilt
May 23 11:03 Sweden Sek 1.25bn 0.125% Jun 2019 I/L bond
May 23 11:30 Germany Eur 1.5bn May 2017 Bubill
May 23 12:00 Norway Details of bond auction on May 25
May 23 17:20 Italy Details of Zero‐coupon/BTP€i auction
May 25 11:03 Sweden Holds bond auction
May 25 11:05 Norway Holds bond auction
May 25 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund
May 26 11:10 Italy Announces details of bond auction
May 26 11:10 Italy Holds Zero‐coupon/BTP€i auction
May 26 17:20 Sweden Details of I/L auction on Jun 02