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Gold slips after comments from U.S. Fed governor lift dollar

Gold prices fell to a one-week low on Friday, weighed down by gains in the dollar after Federal Reserve Governor Christopher Waller called for early tapering of economic support to help chart a tighter monetary policy.

·         Spot gold fell 0.6% to $1,848.05 per ounce by 14:42 ET.

·         U.S. gold futures settled 0.5% lower at $1,851.60.

 

·         The dollar index rose 0.5% against its rivals, making gold more expensive for other currency holders.

·         “Gold prices are declining after some hawkish Fed speak about accelerated tapering boosted the dollar,” said Edward Moya, senior market analyst at brokerage OANDA.

“Inflation and Fed speak are the primary catalyst for gold and right now traders will need to see what happens over the next couple of weeks before having strong conviction on assessing what the Fed will do regarding interest rates.”

 

·         SPDR GOLD HOLDINGS:

Buy more 8.13 Tonnes at 985 Tonnes

 

·         Fed's Waller: central bank should finish tapering bond buys by April

Waller said the U.S. central bank should increase the pace of its reduction in bond purchases to give more leeway to raise interest rates from their near zero level.

The Federal Reserve should increase the pace of its reduction in bond purchases togive more leeway to raise interest rates from their near zero level sooner than it currently expects if high inflation and the strength of job gains persists, Fed Governor Christopher Waller said on Friday.

 

·         Fed's Clarida: global central banks should not coordinate policy

Central banks in different countries can usefully share analysis and may adopt similar policies in response to common global shocks, but explicit coordination would likely do more harm than good, Federal Reserve Vice Chair Richard Clarida said on Friday.

 

·         Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.

 

·         Stock markets went into a tailspin after news that Austria would reimpose a full lockdown o tackle a new wave of coronavirus infections and signs that Germany might do the same.

·         Saxo Bank analyst Ole Hansen said in a note that lockdowns in Europe have helped provide the yellow metal a fresh boost.

 “The recent white-hot inflation prints, especially the 6.2% recorded in the U.S., will likely continue to support gold in its defence against the stronger dollar,” Hansen added.

·         Elsewhere, silver fell 0.6% to $24.63. Platinum slid 1.8% to $1,028.74, while palladium declined 3.4% to $2,060.24, on course for its first weekly decline in three.

 

·         Biden Nears Endgame on Fed Chair Decision

Choice between Jerome Powell and Lael Brainard reflects desire for policy continuity

President Biden faces one of the most important economic policy decisions of his presidency, which is expected this week, when deciding who should lead the Federal Reserve when Chairman Jerome Powell’s term expires in February.

Mr. Biden has signaled he is looking for continuity in Fed policy because he is considering whether to reappoint Mr. Powell for a second four-year term or elevate governor Lael Brainard, who has strongly backed the central bank’s interest rate policy over the past four years.

·         Senators weigh in on potential Fed chair candidates as Biden nears pick

As President Joe Biden nears a decision on appointing a Federal Reserve chair, action over the matter continued to pick up on Friday in the U.S. Senate, which must confirm the choice, with a key moderate Democrat seeking time with the potential nominees and two more progressive lawmakers voicing opposition to the incumbent, Jerome Powell.

In the absence of a decision, lawmakers have been weighing in themselves on the two known candidates: Powell and Fed Governor Lael Brainard. On Friday the White House said there will be "more to report early next week" on Biden's decision, which has taken on added significance with inflation raging at 30-year highs and eroding the first-term Democrat's popularity.

 

·         As Fed contemplates a move, Democratic states lag furthest in jobs recovery

Hopes to restore U.S. employment to its pre-pandemic level, an aim of the Federal Reserve and the Biden administration, now rest on a recovery of jobs in New England and California, a potentially troubling fact for the president's Democratic Party ahead of critical midterm elections and as the Fed plots a possible turn to tighter monetary policy.

Data released on Friday show that through October employment in states with Republican governors was close to 99% of what it was in February of 2020, while Democratic-led states lagged, at roughly 96%.

 

·         Market is ‘one more bad inflation report’ away from a correction, Wharton’s Jeremy Siegel warns

Long-term market bull Jeremy Siegel expects a serious pullback that it isn’t tied to the Covid-19 surge risks.

His tipping point: a drastic change in Federal Reserve policy in order to deal with hot inflation.

“If the Fed suddenly gets tougher, I’m not sure that the market is going to be ready for a U-turn that [chair] Jerome Powell may take if we have one more bad inflation report,” the Wharton finance professor told CNBC’s “Trading Nation” on Friday. “A correction will come.”

 

·         U.S. rate hike fears may further weaken Mexican peso, investors anticipate

 

·         Dollar rises as COVID concerns spark flight to safety

The dollar rose on Friday as investors sought safe havens after Austria said it would be the first country in Western Europe to reimpose a full lockdown amid surging COVID-19 infections and Germany said it could follow suit, sending the euro lower.

 

·         COVID-19 UPDATES:

 

·         COVID comeback threatens fresh setback for European market bulls

 

·         Austria infuriates many with full lockdown as Germany warns it may follow suit