Gold hits 7-week high

Federal Reserve governor Lael Brainard stepped out of the shadow of Fed Chairwoman Janet Yellen and urged the central bank not to hike rates prematurely.

“A great deal of market attention has focused on the exact timing of our first increase in the funds rate”, Fischer observed. That expectation assumed continued solid economic growth and further improvement in the labor market, he added. Gold advanced to the highest level since July on signs that China’s lingering deflation risks offer room for more easing, adding to the case for the U.S. Federal Reserve to hold off raising interest rates this year.

“I think October is a live meeting, clearly there is the potential that the data coming in, in advance of the October meeting will be sufficient we have a lot more in December”, he said following a speech to a university association in Orlando, Florida. He said the economy could keep growing even with a slow rise in rates.

Meanwhile, oil prices retreated from their highest levels in more than a month yesterday as investors took profits after several days of sharp gains. On a MoM basis, consumer prices fell 0.1%, the first drop in seven months.

Fischer’s speech delivered at Jackson Hole, however, was widely seen as giving the “green light” to raise interest rates despite inflation running below the Fed’s 2% target. Since February 2004 the correlation is 89.59% and if one measures from November 2009 when unemployment peaked it is an incredible 96.39%.

The surprise came about a week later with the release of a disappointing September jobs report.

What happens in China has an important – though not decisive – influence on Fed thinking.

Asked by MNI if he thought there was enough new data between the September and October meetings to make a decision, Lockhart said “I think October is a live meeting”. Minutes of the September 16-17 FOMC meeting showed policy makers felt China’s slowdown raised risks to their outlook for growth and inflation in the US.

One of the contributing factors was a desire to have more time to appraise recent developments in the global economy, he said, pointing especially to developments originating in the Chinese economy.

Fed. Gov. Daniel Tarullo, in an interview with CNBC, said the so-called Phillips Curve has not been working for the last 10 years. “We’ve seen a few selling into the rally above $1,155, the 50 percent retracement of the May high to July low”, Mitsubishi analyst Jonathan Butler said.