Gold fell more than 1% on Tuesday after a jump in U.S. producer prices fuelled expectations for sooner-than-expected interest rate hikes ahead of the Federal Reserve's two-day meeting.
· Spot gold fell 0.9% to $1,771.66 per ounce by 01:40 p.m. ET (1840 GMT).
· U.S. gold futures settled down 0.9% at $1,772.30.
· SPDR BACK TO SELL MORE THAN 2.04 TONNES AT 980.60 TONNES
· U.S. producer prices increased more than expected in November as supply constraints persisted, supporting views that inflation could remain uncomfortably high for some time.
· "Producer prices were higher than expected, indicating continued inflation, and gold is viewed as an inflation hedge. But in reality, we're seeing the opposite where hot inflation could mean faster interest rate hikes," said David Meger, director of metals trading at High Ridge Futures.
"This is why inflation is called a double-edged sword."
· Interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding non-yielding bullion.
· "Market participants will closely track the upcoming Federal Open Market Committee meeting to see how the central bank reacts on elevated inflation, which will result in likely larger price moves," said UBS analyst Giovanni Staunovo.
· The Fed will begin its two-day monetary policy meeting later in the day. It is expected to announce that it is wrapping up bond buying stimulus sooner than previously communicated, potentially setting up earlier interest rate hikes next year.
· "Should the Fed step up the gear on tapering, this is likely to punish gold prices as the dollar appreciates, yields rise and rate hike expectations jump," FXTM analyst Lukman Otunuga said in a note.
· The European Central Bank, the Bank of England and the Bank of Japan have also scheduled meetings this week.
· Spot silver fell 1.9% to $21.89 an ounce.
· Platinum lost 1.2% to $918.45, while palladium dipped 3.3% to $1,626.85, after hitting its lowest since March 2020 at $1,579.01.
· Dogecoin spikes more than 20% after Elon Musk says Tesla will accept it as payment for merch
· The Federal Reserve is expected to take a very big step toward its first rate hike
The Federal Reserve is expected to announce a dramatic policy shift Wednesday that will clear the way for a first interest rate hike next year.
Markets are anticipating the Fed will speed up the wind-down of its bond buying program, changing the end date to March from June.
That would free the central bank to start raising interest rates from zero, and Fed officials are expected to release a new forecast showing two to three interest rate hikes in 2022 and another three to four in 2023.
Previously, there had been no consensus for a rate hike in 2022, though half of the Fed officials expected at least one.
· Investors brace for faster Fed taper, rate hikes next year
Investors are pricing in a quicker end to the Federal Reserve's bond-buying scheme ahead of the central bank's policy decision on Wednesday, positioning for multiple rate increases over the next few years.
JP Morgan, Morgan Stanley, Citi, and NatWest Markets are all anticipating the Fed's bond purchases to wrap up in March instead of June. The Fed began scaling back its quantitative easing program last month.
Futures on the federal funds rate , which track short-term rate expectations, on Monday priced in a more than 90% chance of a quarter-point tightening by the Fed by May next year. Investors are pricing in between two to three rate hikes for 2022.
The FOMC meeting starts on Tuesday and it will release a statement at 1400 ET/1800 GMT on Wednesday. Fed Chair Jerome Powell will hold a press conference shortly after.
· Senate passes debt ceiling increase, sending it to House hours before deadline
The U.S. Senate on Tuesday approved raising the federal government's debt limit by $2.5 trillion, to about $31.4 trillion, and forwarded the measure to the House of Representatives to avoid an unprecedented default.
· Euro zone production rises in Oct on capital, consumer goods
Euro zone industrial production rose as expected in October, data showed on Tuesday, with capital and durable consumer goods up the most on the month and non-durable goods output in the lead year-on-year, amid continued economic recovery.
The European Union's statistics office Eurostat said industrial production in the 19 countries sharing the euro rose 1.1% month-on-month in October for a 3.3% year-on-year gain.
· IMF warns Bank of England against inflation inaction ahead of key vote
The International Monetary Fund has urged the Bank of England to avoid “inaction bias” as it gears up for a key vote Thursday on when to hike interest rates in the face of high inflation.
· Strong UK jobs growth puts BoE on the spot over rates
· Chile hikes benchmark rate to 4%, more tightening likely
Chile's central bank hiked the country's benchmark interest rate to 4.0% on Tuesday from 2.75% previously, as the Andean country's economy rebounds strongly from the coronavirus pandemic and the government grapples with high inflation.
The move follows another bigger-than-expected 125 basis-point hike in October by the bank, the steepest in 20 years. Regional neighbors including Peru and Brazil have also been raising their rates this year to help tamp down rising prices.
· Blinken’s trip aims to boost U.S. ties with Southeast Asia amid rising tensions with China, says expert
· Omicron is spreading faster than any other Covid variant, WHO warns
· Omicron now makes up almost 3% of U.S. Covid cases, according to the CDC
The omicron Covid-19 variant first detected in southern Africa about a month ago now makes up about 3% of cases sequenced in the U.S., according to data from the Centers for Disease Control and Prevention.
While the delta variant still dominates the U.S. at about 97% of all Covid cases analyzed, omicron is quickly gaining ground. The new variant represented an estimated 2.9% of all cases sequenced last week, up from 0.4% the previous week, according to the CDC.
Reference: CNBC, Reuters, Worldometers
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