🚩 Gold loses almost 3%

Gold is down 2.8%, extending its decline for a third consecutive session and falling to its lowest level in more than a week. The price has slipped to around $3,867 per ounce, with the main pressure coming from a stronger US dollar, rising expectations for further Fed tightening and hawkish comments from central bank officials. Silver is also under pressure, falling by more than 3%.

• Investors are focused on persistent inflationary pressures in the US and the prospect of higher interest rates. Following the hotter-than-expected CPI reading, speculation increased that the Fed could opt for a 50-basis-point hike in December. Markets are currently pricing in around a 91% probability of a 25-basis-point hike, while the probability of a 50-basis-point move has risen to 10% from 0% before the inflation data.

• Higher interest rates are negative for gold because the metal does not generate interest income, while a stronger dollar makes it more expensive for buyers using other currencies. Market attention now shifts to Friday’s US PPI inflation data, which could provide further clues on the future path of interest rates.

Fed’s Hammack says US rates should rise further

Fed’s Beth Hammack delivered a clearly hawkish message, arguing that the Federal Reserve should continue raising interest rates in order to move monetary policy into a more restrictive stance. In her view, recent data show that price pressures are broadening, while energy remains an additional source of risk as it starts to generate secondary inflation effects. Hammack also stressed that the Fed is not currently “behind the curve,” but warned that acting too late could eventually require larger and more aggressive moves. She therefore prefers smaller, steadier rate increases, which she sees as less disruptive to the economy.

She described the labour market as static rather than healthy due to a lack of dynamism and limited turnover. In her view, one of the key risks is that a more inflationary mindset becomes entrenched in the economy, which could make it harder to bring inflation back to target. Hammack also said that she approaches every FOMC meeting with an open mind. Overall, her comments support the case for further monetary tightening and remain negative for bonds and rate-sensitive segments of the equity market.

GOLD chart (D1 interval)