Gold has given up its earlier gains and is now trading moderately lower in mid-am action. Prices are currently down $10 per ounce at $1211.60. The dollar has moved up to the high of the day, and remains within earshot of recent 1.5 year highs.
The Fed
The dollar has thus far not retreated even as some recent commentary from Fed officials could arguably be considered more dovish. In a recent speech to bankers in New York, Fed Vice Chairman was quoted by CNBC as saying "A monetary policy strategy must find a way to combine incoming data and a model of the economy with a healthy dose of judgment — and humility! — to formulate, and then communicate, a path for the policy rate most consistent with our policy objectives."
The Vice Chairman also alluded to the idea that rates are far closer to neutral at this point where they are considered neither stimulating nor restrictive, and also emphasized the importance of policy being data-driven. In further commentary he was quoted as saying "U.S. monetary policy has for some time and will, I believe, continue to be data dependent in the sense that incoming data reveal at the time of each Federal Open Market Committee meeting where the economy is at the time of each meeting relative to the goals of monetary policy."
Although this commentary may seem a bit more dovish, it seems as if the central bank is simply trying to give itself some wiggle room regarding policy going forward.
The central bank is widely expected to hike rates again in a few weeks, and hitting the pause button at this point could give the impression of political motivations. Investors will likely be far more concerned with the Fed’s plans for next year, as the central bank is currently forecasting another three rate hikes.
If the Fed does in fact elect at some point to halt its tightening, or even reverse course, it could have a significant impact on the dollar which is already at risk of losing steam as the effects of tax cuts and government spending begin to wear off.
A stronger dollar continues to be a major obstacle to higher gold, which has yet to pose a significant challenge to resistance in the $1245 area.
Gold Price Chart
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