A worse-than-expected consumer confidence report further cooled Fed tapering expectations. Vice Chair Richard Clarida also spoke to Yahoo Finance, talking about inflation. He noted that while there have been rising concerns about elevated CPI, the central bank continues to see these forces as transitory. There was also strong demand at a 2-year Treasury note auction, consequentially pulling yields lower.
The non-interest-bearing yellow metal tends to thrive in an environment where returns on cash or fixed income investments are depressed. Gold’s ascent since April has been occurring alongside fading 2022 Fed rate hike bets. That also means that a key risk for XAU/USD down the road is when the central bank inevitably begins to push for tapering monthly asset purchases and raising rates.
For now, gold may rise. The yellow metal climbed during Wednesday’s Asia-Pacific trading session, capitalizing on more weakness in the US Dollar. This seemed to be due to the RBNZ rate decision, where hints of a rate hike next year increased demand for the New Zealand Dollar at the cost of the Greenback. Dovish commentary from the Fed may keep gold’s momentum going during the Wall Street session, check out the DailyFX Economic Calendar for when speakers are set to cross the wires.