Gold headed for its worst month in 3 years on imminent rate hike


Gold headed for its worst month, as Federal Reserve Governor Jerome Powell signals imminent rate hike in December. What is next for bullion?

30 November, AtoZForex Gold was headed for its largest monthly loss since June 2013. Analysts believe that this trend exists due to the expectations of the imminent rate hike by the Federal Reserve (Fed).

Gold headed for its worst month

While we are approaching the end of 2016, one of the crucial meetings is scheduled on the 12-13 of December. These days are going to be vital for the US economy stance, as the Fed policymakers will decide on the matter of the rate hike. Since US economic data is coming in strong, a number of analysts see a high chance of the December Fed rate hike. Meanwhile, gold prices were declining due to their sensitivity to the increases in the US interest rates.

Spot gold was almost unchanged at $1,288.86 an ounce by 0627 GMT. US gold futures were stable at $1,187.90 per ounce. Spot gold has dropped 6.83 percent so far this month.

The yellow metal lost $150 from the 9th of November post-election high of $1,337.40 per ounce. The bullion was hardly hit by the firming US dollar, which has surged on strong Treasury yields. That time, investors believed that Donald Trump’s planned policies would trigger more rapid pace of inflation. The managing partner at Hong Kong-based bullion services provider J. Rotbart & Co, Joshua Rotbart, has stated:

“Markets seem to accept Trump as good for business. His statements about increasing investments in infrastructure, tax reform aimed at strengthening local businesses and import reforms to prioritize local businesses have increased growth expectations.”

Imminent Fed rate hike?

The USD on Wednesday was headed up on rising US debt yields. The economy of the US advanced faster than expected in the Q3, being pushed by strong consumer spending and an increase in soybean exports.

Gold headed for its worst month

According to the Federal Reserve Governor Jerome Powell, the case for increasing the US interest rates has “clearly strengthened” since early November. This was perceived as a strong signal for the imminent rate hike.

As gold is highly sensitive to the hikes in interest rates, which boost the opportunity of holding non-yielding assets such as bullion while supporting the USD, in which it is priced.

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