XAUUSD prices kept stable on Monday as market participants gauged the global economic policy outlook, with inflationary hedge demand countering hawkish comments from U.S. Federal Reserve officials that kept the dollar and Treasury yields supported.
The US 10-year Treasury yields hovered near two-year highs hit in the previous week, after the Fed said manufacturing output dropped 0.3% in December, shy of an estimate calling for a 0.5% rise. read more
Investors are now anticipating the speeches from Fed officials this week ahead of the Jan. 25-26 policy meeting, but there have been more than enough hawkish comments to see the market almost fully price in a first interest rate hike for March and rates of 1.0% by the year-end.
Gold is regarded as an inflationary hedge, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion. The US dollar index held onto Friday’s gains, as selling pressure fell driven by the view that the Fed’s tightening moves were largely priced in.
Traders are also on the lookout for the Bank of Japan policy meeting which concludes on Tuesday, British inflation data on Wednesday and Australian jobs figures on Thursday.
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