Gold climbed above $4,000 an ounce Friday after hitting its lowest level since July, as traders weighed a Reuters-reported 81% probability of a December Federal Reserve rate increase.
Reuters put spot gold at $4,023.95 per ounce at 8:10 a.m. EDT (12:10 UTC) Friday, Oct. 23, after an earlier session low of $3,986.50. The news agency said bullion remained 3.5% lower for the week. EconoTimes previously covered gold's rebound as Treasury yields eased.
Reuters reported that CME FedWatch showed a 9% probability of a rate increase at the Fed’s Oct. 27-28 meeting and an 81% probability for December. CME says the tool estimates those odds using prices in 30-day federal funds futures contracts.
Reuters linked the rate bets to inflation concerns associated with higher oil prices. Hamad Hussain, a climate and commodities economist at Capital Economics, told Reuters that rising oil prices could keep real interest rates higher for longer. He said higher real rates can weigh on gold’s appeal because bullion pays no interest.
The Federal Open Market Committee voted unanimously Sept. 16 to raise the Fed’s target range by 25 basis points to 3.75%-4.00%. Its statement said inflation remained elevated. The meeting minutes recorded that most participants thought another increase would likely be appropriate by year-end. Separately, the minutes said future decisions would depend on incoming information.
New York Fed President John C. Williams said in Sept. 29 remarks that there was “no need for urgency” after the September move. He also said a late-year increase could fit his forecast if the economy followed the path he expected; those remarks reflected his own view.
The Fed’s next meeting is scheduled for Oct. 27-28. The Bureau of Economic Analysis (BEA) is set to release its advance estimate of third-quarter gross domestic product and September personal income and outlays data, including the PCE price index, on Oct. 29 at 8:30 a.m. EDT.
