Gold Dropped as the Dollar Firmed With Expectations That Interest Rates Will Rise

  • Commodities Analysis

Gold yesterday settled down by -1.02% at 47434 as the dollar and bond yields firmed with expectations that U.S. interest rates will rise next year, shored up by the renomination of Federal Reserve Chairman Jerome Powell. The dollar index hit a fresh 16-month peak and U.S. Treasury yields firmed after Powell was nominated for a second term, adding to confidence that the U.S. central bank will lift interest rates in 2022. Investors are betting that newly renominated Fed Chairman Jerome Powell will need to step up the pace at which the central bank is normalizing monetary policy to better grapple with surging consumer prices.  
Vice Chair of the FOMC Richard Clarida said that it "may very well be appropriate" to discuss accelerating the pace at which the Fed is winding down its bond-buying programme at the December policy meeting. Speaking at the San Francisco Fed's 2021 Asia Economic Policy Conference, he added that there are upside risks to inflation, that the economy is in a very strong position at that it looks as though Q4 is going to be very good. Federal Reserve Board of Governors member Christopher Waller suggested that if the bank was to double the pace of its QE taper (to $30B per month), then the taper could conclude by the start of April.  
Technically market is under long liquidation as the market has witnessed a drop in open interest by -7.48% to settled at 4785 while prices down -489 rupees, now Gold is getting support at 47187 and below same could see a test of 46939 levels, and resistance is now likely to be seen at 47857, a move above could see prices testing 48279.  

Trading Ideas:
# Gold trading range for the day is 46939-48279.
# Gold dropped as dollar, yields firm on rate hike bets
# Jerome Powell renominated as Fed chair
# Market expectations for 2022 rate hike reinforced

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