International gold prices rebounded on Tuesday (December 7), but higher US 10-year Treasury yields limited gains. With significant inflation data released later this week, the Fed is expected to tighten monetary policy more aggressively.
At 15:24 Beijing time, spot gold rose 0.25% to $1783.55/oz; the comex gold main contract rose 0.24% to $1783.8/oz; the dollar index fell 0.08% to 96.233; and the US Treasury yield rose 1.7 basis points to 1.451%.
Data showed a sharp drop in the unemployment rate last month, suggesting that the labor market is tightening. The upcoming US Consumer Price Index (CPI) report on Friday (December 10) will be a key determinant in gauge of the Fed's next move.
Fed policymakers are likely to accelerate the scaling back stimulus at next week's policy meeting. Stimulus reductions and interest rate hikes tend to push up government bond yields and raise the opportunity cost of gold, non-yield assets.
Darrell Cronk, chief investment officer for Wealth and Investment Management at Wells Fargo, said Monday that both inflation and economic growth in the U.S. next year could be around 4 percent, suggesting inflation would remain above expectations. "We think inflation will be more persistent than people expect, around 4 percent."
Kyle Rodda, an analyst at IG Markets, said: "Gold prices should slowly weaken in the outlook for tightening policy, and if the CPI is hotter than expected, it will only lead to expectations of more aggressive action by the Fed." ”
But Steve Brice, Chief Investment Officer at Standard Chartered Bank, said the Fed could tighten policy less than financial markets are currently digesting. "We know that the market expects the Fed to raise interest rates about twice next year, and at one point expected to raise interest rates close to three times. We still think that there will only be one rate hike. ”
Rodda also cautioned: "The real yield is still negative, so investors may intend to diversify their funds from the bonds to some other underlying that can preserve value, which may support the gold." He added that this will ultimately depend on how hawkish the Fed is next week, and the impact of the Omicron variant on inflation expectations.
Investors also assessed November gold product sales at the Perth Mint, one of the world's largest gold producers. The plant said gold product sales surged about 94% in November from the previous month, hitting a new high in nearly eight months.
General Manager Neil Vance said in a blog post: "Demand for physical gold has generally picked up, coinciding with the launch of the Perth Mint's 2022 Australian Kangaroo Series. The feedback from our global distribution network was excellent. ”
This article originated from Huitong Network