Gold, set for best month in 2022 on dovish Fed, China hopes
Gold prices were muted on Wednesday in anticipation of a speech by Federal Reserve Chair Jerome Powell but were headed for their best monthly gain this year following signals that U.S. interest rate hikes are likely to slow in the coming months.
Powell is expected to provide more cues on the U.S. economy and the path of monetary policy for the remainder of the year when he speaks at an event in Washington later in the day. Markets are also awaiting key U.S. payroll data later in the week.
While the minutes of the Fed’s November meeting showed that a growing number of Fed members support smaller rate hikes in the coming months, Fed speakers have warned that stubborn inflation will keep U.S. rates elevated until well into 2024.
Spot gold prices steadied around $1,748.99 an ounce, while gold futures fell 0.1% to $1,747.30 an ounce. Both instruments jumped 1% on Tuesday and were set to rise around 7% for November – their strongest monthly gain since May 2021.
But the outlook for gold remains muted, given that U.S. inflation is trending well above the Fed’s annual target. Stubborn inflation could see the central bank tighten monetary policy further to bring down prices – a scenario that is negative for gold.