Gold falls on yield rally, despite Fed saying no rate hikes soon By

© Reuters.

By Barani Krishnan – The bond market is struggling to buy into the Fed’s talk that US rates won’t rise anytime soon. And gold pays for that anxiety again. the New York Comex closed the official session on Thursday at $ 1,851.40 an ounce, $ 3.50 or 0.2% despite Federal Reserve Chairman Jay Powell saying the time for a rate hike is “very soon “and that any increase will have to be on the back of significant economic recovery. The benchmark gold futures contract actually spiked as high as $ 1,857.30 as Powell put it, before being dipped by notions from bond and currency traders that they knew better about the state of the US economy than the bank’s head. central country. In the post-liquidation trade, at 2:35 pm ET (19:35 GMT), February gold was trading even below its close, at $ 1,847.30. Meanwhile, bond yields for the benchmark returned to positive for the first time in three sessions, rising 3.3% to show a reading of 1,124 at the time. The, alternative trade to gold, fell when Powell ruled out an immediate rate hike, helping the yellow metal’s initial rally. While the dollar later fell back, it remained in negative territory. However, that didn’t help lift gold. Rising bond yields have wreaked havoc on gold prices since last week, causing a collapse of more than $ 100, or 4%, from highs above $ 1,960 reached by the yellow metal earlier in the year. The trend persisted on Thursday due to ideas that the US economy will somehow fix itself, miraculously, in the coming months from the coronavirus pandemic and will pressure the Fed to raise rates, despite from a clique of Fed officials, Powell being the latest, to deny that since Tuesday. “What we are really saying is that we are no longer going to raise interest rates just because, for example, if unemployment were well below our current estimates of the natural rate of unemployment,” Powell said Thursday in a broadcast on Thursday. alive. discussion organized by Princeton University. “That would not be a reason to raise interest rates, unless we see worrying inflation or other imbalances that could threaten achievements or our mandate, and there is significant change.” The Fed has kept rates at 0-0.25% to provide relief to the economy since the coronavirus pandemic gripped the United States in March 2020. The US economy contracted 5% in the first quarter of the year past and 31.4% in the following three months. bouncing 33.1% in the third quarter. The fourth quarter performance is yet to be finalized. Despite the rebound in the third quarter, the US economic outlook remains dire with Covid-19 hospitalizations and deaths reaching new highs in recent months. The United States also continues to be the country most affected by the pandemic, with more than 23 million cases registered since January 2020 and more than 385,000 deaths. Powell said there was “a lot of slack” in the labor market and that wage pressures were unlikely to reach levels that could create or support higher inflation. “Also, the other factor to consider is the scarcity of global demand. In many of the large advanced economies, in the countries around the world that started this crisis, there are deeply negative interest rates and little political room for interest rate hikes. All of that is going to take a while, and you know, the US economy is tightly integrated with the rest of the world. That’s going to matter. “The United States lost more than 21 million jobs between March and April 2020, at the height of the coronavirus-forced business closures. There was a rebound of 2.5 million jobs. in May and 4.8 million in June, before the recovery began to slow. In both September and October, fewer than 700,000 jobs were added each month. In November, there were only 245,000 new hires, while in December they were lost 140,000 jobs, the first such decline since April, has continued into 2021, with 965,000 Americans filing for unemployment benefits last week, 23% more than the previous week and the highest in nearly five months. Joe Biden, who will take office Jan. 20, vowed to issue “trillions of dollars” of stimulus, with the first announcement of $ 2,000 checks for individuals and separate aid for states and businesses. It will probably arrive later on Thursday. Last year, after the first $ 3 trillion Covid-19 stimulus by the Trump administration in March, both yields and the dollar crashed, prompting gold futures to skyrocket to all-time highs of nearly 2,090. dollars in August. This time, however, they are both rising and gold is falling, as if currency devaluation is a good thing for the dollar and a bad thing for a safe-haven like gold.