Fed Officials Boost Rate Hike Expectations

The dollar rose 0.2 percent against a basket of six major currencies.

Gold fell 1% on Monday, nearing last week’s 2010 low on a robust dollar and upbeat comments from Federal Reserve officials on a possible United States rate hike next month.

USA dollar-denominated savings by local residents increased at a record rate last month as people apparently expect the greenback to strengthen following what many see as an imminent US rate hike, market observers said Monday.

Gold has lost 9.5 percent this year as expectations for a higher USA rates damped the allure of the metal which doesn’t pay interest.

The euro was down 0.3 percent against the dollar at $1.0620 after hitting its lowest in more than seven months during the Asian trading session, just above $1.06.

San Francisco Fed president John Williams on Saturday cited a “strong case” for raising rates when Fed policy makers met in December, as long as USA economic data did not disappoint, echoing other officials.

Although precious metals ETFs have recently displayed some strength, gold is still in a lengthy bear market, giving some traders pause about how much more near-term upside the yellow metal has in store.

News of a previously unscheduled meeting of the Federal Reserve’s governors today, Monday, is inevitably leading to speculation that some USA interest rates could be increased well before next month’s regular meeting of the Federal Open Market Committee, which sets the benchmark Federal funds rate.

There’s a 68% chance of a rate hike by the Federal Reserve at its meeting on December 15-16.

Yes, the Fed will hike short-term rates at some point – likely in December – but history shows a Fed rate hike is nothing to worry about when it comes to long-term interest rates.

Data showed manufacturing sector growth slowed to its weakest pace since October 2013 and existing home sales declined 3.4 percent last month, but both reports continued to support long-term stability in the USA economy. Higher rates tend to weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the USA dollar. Tokyo’s share market was closed for a public holiday. “They re-iterated the gradual pace of future rate moves, and this has led to some profit-taking in the dollar”, senior currency strategist at Rabobank, Jane Foley told CNBC.