The Governor’s comments gave the US Dollar a boost with gold falling slightly due to the precious metal’s typically inverse correlation with the greenback. The remarks also served as a reminder that gold’s huge gains last week were driven by sentiment that the Fed will be less aggressive with its future upcoming interest rate decisions rather than on any firm fact.
The pace of last week’s gains, in which gold climbed more than $100 an ounce, leave gold open to some profit-taking this week as investors reassess where the true value of the precious metal lies. While the latest inflation figure out of the US was undoubtedly encouraging, rising consumer prices remain an issue that the Fed looks determined to get back under control through interest rate rises.
Taking all these factors into consideration, gold’s current price looks dangerously high and it would only take a slight shift in sentiment on where the Fed will go with its December rate move for the price to come quickly crashing back to $1,700 an ounce.
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