Gold prices have dropped to levels last seen in March as the Fed’s hawkish narrative gains traction through Fed speakers. Minneapolis Fed President Neel Kashkari (a known hawk) added stated that the Fed may need hike one more time as well as maintain rates at elevated levels throughout 2024. This has translated through to the higher US Treasury yields and consequently real yields (see graphic below), weighing on the non-interest bearing metal.
US REAL YIELDS (10-YEAR)
US GDP printed roughly in line with expectations but the miss on initial jobless claims data reinforced the robust US labor market narrative. One positive from a dovish perspective was the decline in core PCE prices that could relive some of the short-term inflationary concerns plaguing the US. That being said, until cracks start appearing in the jobs market, the Fed may need to maintain a restrictive policy for a longer period.
The rest of the trading day will be centered around Fed guidance including the Fed Chair Jerome Powell. After Neel Kashkari stoked volatility in the markets by reinforcing his views on sustained aggressive monetary policy, it will be interesting to see whether or not other Fed officials have the same viewpoint.