Gold Price Drops as Fed’s Rosengren Eyes Early Rate Hike

gold price drops as fed rate hikeThe gold price retreated for a second session on Monday after a dovish Federal Reserve official projected more and faster interest-rate hikes than the market is expecting.

The gold price for June dropped 0.3% to finish at $1,219.30 a troy ounce.

Boston Fed President Eric Rosengren, who is usually cautious, said on Monday that the Fed could tighten monetary policy earlier than expected given the steady pace of economic recovery.

Theses comments appeared to negate the central bank’s relatively dovish stance. Chairwoman Janet Yellen last week had highlighted the need for the central bank to approach future rate increases with caution.


Rosengren said the world’s largest economy economy continued to improve despite headwinds from overseas. Financial market volatility has subsided, he added.

“While problems could still arise, I would expect that the very slow removal of accommodation reflected in futures market pricing could prove too pessimistic,” he said in speech at a cybersecurity conference hosted by his regional bank.

“If, as I expect the economy data continue to show a moderate recovery, it will likely be appropriate to resume the path of gradual tightening sooner than is implied by financial-market futures,” he said. (Source: “Fed’s Rosengren sees more and faster rate hikes than the market expects,” April 4, 2016.)

Traders expect only one rate hike in 2016 with the first move coming in September, Reuters reported, citing the CME Group FedWatch tool.

The Fed has projected two interest-rate hikes in 2016 in its latest “dot plot” interest rate projections, down from four increased it had forecast in December.

Rosengren is a voting member of the Fed policy committee this year.

Alternate members Minneapolis Fed President Neel Kashkari and Dallas Fed President Rob Kaplan are due to give remarks in the evening. Fed Chair Janet Yellen is scheduled to speak on Thursday.

The benchmark 10-year treasury yield was around 1.77%, while the U.S. dollar index held mildly lower.

U.S. stocks traded in a range, U.S. crude oil futures settled near session lows at $35.70 a barrel, down $1.09, or 2.96%.

The world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, was down 0.6% to $116.24 at 3:28 p.m. The ETF has lost 3.6% over the past month.

The gold price is still up 16% from its 52-week low of $1,047.2 reached on December 3, but 5% lower that its one-year high of $1,1287.8 touched on March 11.

The silver price fell 0.5% to $14.95, platinum slid 1.4% to $941.10 and palladium fell 2.3% to $551.78.