Gold struggles near 6-yr low on USA rate hike view

In the end, the Fed at its October 27-28 meeting left its key rate unchanged but said further progress could justify a December hike.

The discount rate is interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank’s lending facility-the discount window.

Ever since a speech Federal Reserve Chair Janet Yellen gave in March discussing the concept and its implications for policy, the NY Fed’s trading desk has been surveying the 22 primary dealers it transacts with on Wall Street about their views on where the neutral rate is now, and how it will evolve over time.

The idea, he said, is “something that we haven’t studied that much, but I think needs a lot more thought”. Although he thinks a “boom” time is coming, he doesn’t think the Fed should increase rates at every meeting like it did during that last rate hike cycle from 2004 to 2006. Consumer prices fell 0.1 per cent from a year ago, the same rate of decline as in September.

Gold, silver near 6-year lows * Platinum plumbs fresh seven-year low * Fund outflows continue to hurt sentiment (Updates prices) By A. Ananthalakshmi SINGAPORE, Nov 24 (Reuters) – Gold and silver languished near their lowest levels in six years on Tuesday, while platinum dipped to a seven-year low on a strong dollar and growing expectations that the Federal Reserve would increase US interest rates next month.

“WE hope that relatively soon we will become reasonably confident that inflation will return to our two per cent objective”, said William Dudley, the influential head of the NY Fed.

I continue to expect a December rate hike is far from accomplished, regardless of today’s decision on the discount rate. He also said that global central banks will “at best” move benchmark rates back up to 2 percent, whereas historically a normalization would have seen rates above 4 percent. “Since economic data can surprise on the upside and the downside, maybe there will be opportunities to show we are data dependent”.

The Bank of Japan remains committed to Abenomics and has embarked on its own version of quantitative easing to pump prime the economy and raise inflation rates.

A variety of consumers loans are tied to the fed funds rate, so sales of a few goods such as autos or appliances could also taper off.

As it is, the USA dollar has already risen by more than 10 per cent against the euro, and 3 per cent against the Japanese yen over the past year. They argued that the Fed would only confuse financial markets by delaying, and it risked undermining economic confidence.