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Gold Jul '12 (GCN12)

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Gold Futures Market News and Commentary

Dollar Rallies and Gold Sinks on Reduced Fed Rate Cut Chances

The dollar index (DXY00) is up sharply by +1.29% at a 3.25-month high. The dollar is extending Monday's rally today after oil prices soared to an 8.5-month high, boosting inflation expectations and reducing the chance of additional Fed rate cuts, a supportive factor for the dollar.  Market expectations for Fed easing have fallen, with money markets now pricing 37 bp of Fed rate cuts this year, down from 60 bp last Friday.  In addition, today's stock slump has boosted liquidity demand for the dollar.

NY Fed President John Williams said additional Fed interest rate cuts will be warranted if inflation slows further once most of the impact of tariffs has passed.

Kansas City Fed President Jeff Schmid said, "Inflation has been above the Fed's objective for nearly five years now, so I don't think we have room to be complacent."

Swaps markets are discounting the odds at 2% for a -25 bp rate cut at the next policy meeting on March 17-18.

The dollar continues to see un... Read more

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