GOLD PRICES fell to the lowest in 3 weeks against all major currencies in London on Wednesday, falling as world stock markets rose after Wall Street set fresh all-time highs despite growing expectations of tighter central-bank policy in the US, UK and Eurozone.
UK government Gilt yields jumped
to their highest since February followed stronger-than-expected GDP growth for Q3, while US 10-year Treasury yields
rose to fresh 7-month highs of 2.45% after news reports said Republican lawmakers advised President Trump to pick “hawkish” economist John Taylor as the next chair of the Federal Reserve.
Eurozone stock markets edged higher on Wednesday but London’s FTSE100 slipped and the UK-focused FTSE250 held flat after new GDP figures
said economic growth held at 1.5% per year in the third quarter of 2017.
The last major data release before next week’s Bank of England interest-rate decision, that just beat analyst forecasts but still put GDP growth at the slowest in almost 5 years, with the construction sector technically in “recession”
by shrinking for the second quarter in a row.
Sterling jumped almost 1.5 cents against the Dollar to a 1-week high above $1.32.
Despite fears of an underlying slowdown as Brexit talks wear on, “The GDP data suggest the UK could stomach a rate rise
,” says one London fund manager.
Reporting Tuesday’s GOP “vote” on the next Fed chair meantime, “Trump only asked about [current Fed governor Jerome] Powell and Taylor,” says one report
, “and most senators simply smiled instead of raise a hand for either candidate.”
Prior to current chair Janet Yellen’s term ending in February, December’s US rate rise to a ceiling of 1.50% is now virtually certain according to betting on CME futures contracts
From there to September 2018, the odds of “no change” have fallen over the last month from stronger than 1-in-3 towards just 1-in-5.
“Speculation about higher interest rates in the US is weighing on the gold price,” says the latest Commodities Daily from German financial services group Commerzbank.
“If [Trump] does indeed choose Taylor, gold is likely to fall sharply.”
“But [Taylor’s] support of tax cuts [by the Trump admininstration] may make him reluctant to hike rates.”