Gold pares losses as Fed’s Williams signals 2027 end to hikes
Fed Bank of New York president’s expectations for no further tightening next year should be ‘positive’ for the metal, says TD Securities
GOLD pared losses after US Federal Reserve Bank of New York president John Williams said he still sees one more interest rate hike as appropriate for 2026, but does not expect further tightening in 2027.
Bullion traded little changed near US$4,164 an ounce on Tuesday (Oct 13) after losing as much as 0.6 per cent earlier in the session. The precious metal is struggling for direction as oil-market gyrations and the US interest rate outlook command traders’ attention.
US Treasury yields edged lower after Williams’ remarks, with two-year notes erasing an increase of as much as three basis points. Lower yields are typically supportive for gold, which does not bear interest.
“William’s comments should be a positive for gold, as it reduces the risk of higher carry costs later into 2027,” said Bart Melek, global head of commodity strategy at TD Securities.
Clues on the Fed’s next move are likely to come from Wednesday’s US consumer price index reading, followed by the producer price index and import prices later in the week.
Swaps traders are pricing in a low chance of a hike at October’s Fed meeting, but see a roughly 90 per cent chance of an increase at the following meeting in December.
Fed Cleveland president Beth Hammack said on Monday that smaller, more frequent policy adjustments can help inflation expectations remain anchored, but stopped short of backing an October hike.
Gold’s resilience despite elevated interest rate expectations suggests other risks are continuing to underpin demand, Commerzbank’s head of FX and commodity research Thu Lan Nguyen wrote in a note.
Concerns over France’s debt burden are supporting demand for haven assets, she said, while higher rates are increasingly becoming a “double-edged sword” for bullion, as they raise the opportunity cost of holding the metal but also increase governments’ borrowing costs.
Spot gold was down 0.2 per cent at US$4,162.71 an ounce at 2.49 pm New York time. Silver rose 2 per cent to US$59.25, while platinum and palladium also ticked lower. The Bloomberg Dollar Spot Index fell 0.2 per cent. BLOOMBERG
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