Gold Prices Mixed Amid Fed Rate Hike Bets

Gold prices traded mixed on Wednesday as traders leaned toward another 75-basis-point rate hike at next week’s FOMC meeting.

Spot gold edged up 0.1 percent to $1,704.76 per ounce, while U.S. gold futures were down 0.2 percent at $1,714.75.

The dollar index consolidated following Tuesday’s impressive rally and the two-year U.S. Treasury yield scaled a new 15-year high, as hotter-than-expected U.S. inflation data boosted bets that the Federal Reserve will stay aggressive in raising rates.

While markets have fully priced in an interest rate hike of at least 75 basis points at the conclusion of the Fed’s policy meeting next week, talk of a 100-bps lift-off are now back on the table.

Nomura analysts have called for a full percentage hike in short-term interest rates, citing the emergence of upside inflation risks.

Meanwhile, the yen’s continued depreciation prompted the Bank of Japan to conduct an operation often seen as a precursor to currency intervention, as investors shunned riskier assets amid increasing uncertainty about the global economic outlook.

In economic releases, Eurozone industrial production declined more than expected in July, data published by Eurostat showed earlier today.

Industrial output dropped 2.3 percent from June, when production was up 1.1 percent. The pace of decline was deeper than economists’ forecast of -1.0 percent.

Elsewhere, U.K. consumer price inflation slowed slightly in August from a 40-year high amid a fall in fuel prices, figures from the Office for National Statistics (ONS) showed.

Consumer price inflation unexpectedly slowed to 9.9 percent in August from 10.1 percent in July. The rate was forecast to rise slightly to 10.2 percent.

Canada manufacturing sales for July and U.S. PPI for August will be released in the New York session.

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