International gold prices came under pressure on Wednesday after hawkish comments from Fed officials pushed the dollar to a multi-year high and cautious traders waited for the Fed's latest minutes.
16:02 Beijing time, spot gold fell 0.05% to $1922.62 / oz; COMEX gold contract fell 0.09% to $1925.8 / oz; and the dollar index rose 0.13% to 99.620.
The dollar index hit 99.761, its highest level since May 26, 2020, as Fed officials pushed for a contraction as soon as possible, with one of them saying he was open to raising interest rates by 50 basis points. A stronger dollar makes gold less attractive to holders of other currencies.
Matt Simpson, senior market analyst at City Index, said: "the strength of the dollar and the lack of safe-haven demand limit its [gold] upward potential." As each rebound from the support level of $1916 has failed to keep the rise, [the dollar] has undoubtedly taken away the light of gold, and the overall price trend is still unstable and uncertain. "
Lael Brainard, the Fed governor, said on Tuesday that she expected a methodical rate hike and a rapid shrinking of the Fed's balance sheet to shift monetary policy to a "more neutral stance" later this year, adding that it would tighten further as needed.
"I think we all absolutely agree that inflation is too high and that reducing inflation is the most important," Brainard said at a meeting of the Federal Reserve in Minneapolis. " It said the Fed would begin rapidly to shrink its nearly $9 trillion balance sheet as early as next month, at a "much faster pace" than the last time it shrank.
This is the first time that Brainard has spoken publicly since the Fed launched a new round of interest rate hikes last month. The hawkish comments by Mr Brainard, who is often seen as dovish, made investors worry about "the speed and intensity of the Fed's balance sheet reduction".
"yesterday's hawkish comments from key Fed members are likely to cast a shadow over today's Fed minutes, as they point to a 50 basis point rise in interest rates at the next meeting and a faster-than-expected reduction in the balance sheet," Simpson said.
The minutes of the March Fed meeting will be released at 2: 00 Beijing time on Thursday, April 7, and may provide clues as to how quickly policy makers want to shrink their balance sheets and raise interest rates. The Fed's stance has become more and more hawkish recently.
