- Powell said that interest rates may not be high enough to combat inflation.
- Fed funds futures traders assign a 25% chance of an additional Fed hike by January.
- A Labor Department report showed a slight decrease in jobless claims to 217,000.
Gold prices increased on Thursday despite Powell’s comments that interest rates may not be high enough to combat inflation. This increase might be because investors had already priced in Fed hawkishness earlier in the week.
Some Fed officials are emphasizing the possibility of further rate hikes if inflation does not decline toward the 2% annual target. Serebriakov noted a divergence of opinions on whether to increase rates.
Richmond Fed President Thomas Barkin acknowledged progress in inflation but remained uncertain about the need for the US central bank to raise its policy rate. Acting leader Kathleen O’Neill Paese of the Fed Bank of St. Louis expressed concern that observers may not fully understand the central bank’s commitment to reducing inflation.
Meanwhile, Fed funds futures traders now assign a 25% chance of an additional hike by January. This figure increased from 19% on Thursday morning but fell from 28% a week ago. Before Powell’s comments, gold had dipped slightly as yields rose following a weak auction of 30-year Treasuries.
The recent rally in gold was fueled by softening US economic data. Moreover, gold prices got support from a pullback in US Treasury yields from multi-year highs amid hopes that the Fed may have concluded its rate hike cycle. After a robust rally last week, the pace of gold gains slowed.
Elsewhere, a Labor Department report showed a slight decrease in US jobless claims to 217,000. The report was in line with economists’ expectations.
However, continuing claims rose. According to some economists, the increase in continuing jobless claims suggests that although new layoffs are few, individuals without employment find it harder to get new jobs. It aligns with recent hiring data indicating a slowdown in the job market, which has supported gold prices.
In October, the Labor Department revealed a drop in hiring, causing a slight uptick in unemployment to 3.9%. However, this rate is still historically low. Another report indicated a decrease in job openings to 1.5 for every unemployed person in September, down from the more competitive ratio of 2-to-1 seen last year when the job market was at its tightest.
Economists argue that the claims data strengthens the argument for the US Federal Reserve to maintain current interest rates.