Gold Market Continues To Doubt Fed Comments On Rate Hikes

Tuesday May 17, 2016 14:09

(Kitco News) - The gold market continues to doubt comments from Federal Reserve regional presidents, who say that they still see potential to raise interest rates later in the year.

San Francisco Fed President John Williams is the latest central banker to come out, saying that it “makes sense” for the Fed to raise interest rates two or three times this year. His comments were made late Tuesday morning in an interview with the Wall Street Journal.

However, gold prices have been unfazed by the comments, settling the day up by $2.70 to $1,276.90 an ounce.

“I think that the data to my mind are lining up to make a good case for rate increases in the next few meetings, not just June, which means it’s very live in terms of that,” said the nonvoting Fed member in his interview with  the WSJ.

He added that he is not too worried about U.S. economic growth.

Williams’ comments reflect the sentiment shared by voting member and Boston Fed President Eric Rosengren, who said last week at the Greater Concord Chamber of Commerce in New Hampshire that markets are too pessimistic about the fundamental strength of the domestic economy.

Rosengren said he supports the gradual normalization of interest rates.

While still mostly hawkish, Williams noted that Britain’s June 23 referendum on whether or not to remain part of the European Union could potentially add some uncertainty.

According to CME’s 30-day Fed Fund futures prices, markets are only pricing in an 11.3% chance that the central bank will raise interest rates in June.  However, expectations are starting to increase for later in the year as markets price in a 42.8% chance that interest rates rise in December.

By Neils Christensen of Kitco News