Gold Price Hits Two-month Low on US Rate Expectations

Gold Price Hits Two-month Low on US Rate Expectations”

As markets are now relieved and confident in the direction of the Federal Reserve under new Chairman Jerome Powell, optimistic US economic news could make the US Dollar even more appealing and could push AUD/USD lower towards the end of the week.

The Dow Jones Industrial Average (INDEXDJX:.DJI) lost more than 580 points following Trump's announcement, but overall the USA economy is building momentum.

The euro fell to a six-week low after an upbeat assessment of the United States economy by Fed Chairman Jerome Powell boosted the dollar, while slowing eurozone inflation underlined the ECB's caution in removing stimulus in the region.

"There's definitely concern we're going to get into a trade war and protectionism leads to foreign companies being unhappy", said Andrew Frankel, co-president of Stuart Frankel & Co in NY. The S&P 500 fell 36.16, or 1.33%, to 2,677.67, while the Nasdaq Composite declined 92.45, or 1.27%, to 7,180.56.

Trump indicated that he plans to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports.

"There's the chance he dials back his hawkish rhetoric, but if he stays the course, there's always a chance we could see higher repricing of U".

This follows a day of general weakness on Wednesday that saw copper, zinc and lead fall between 2.2% and 2.9%, with nickel prices off by 1.4%, while aluminium and tin were little changed.

The three major US stock indices fell more than 1.0 percent as Trump's tariff announcement added to investors concerns about the pace of Federal Reserve interest rates rises as inflation edges higher. Brent crude lost 0.17 percent to $64.62 per barrel. It is still down 1.5 percent this year, dogged by investor suspicions that the Trump administration prefers a weaker dollar to mend its bulging trade deficit.

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European markets had already closed by the time Trump's comments about tariffs was reported.

The dollar added to gains against the euro, the yen and a basket of major currencies and gold prices fell as Mr. Powell's comments were in general positive for the greenback, said Brad Bechtel, managing director of FX at Jefferies, in NY.

The most active gold contract for April delivery fell 12.70 dollars, or 0.96 percent, to close at 1305.20 dollars per ounce.

'At the moment the Fed are projecting three rate hikes this year while financial markets are now pricing in around 80bp of rate hikes. The Japanese yen JPY= firmed 0.37 percent versus the greenback at 106.28 per dollar. At the December meeting, the central bank projected that it would raise rates another three times this year.

Platinum was 0.3% lower at $963.40 USA per ounce after falling to its lowest since January 4 at $950.50 US on Thursday.

Italy's 10-year bond yield fell 2 basis points to 2.09 percent.

In other precious metals, silver was down 0.3% at $16.41 ounce after touching its lowest in over two months at $16.16 the previous session.

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