Return of interest rate speculation pressures gold price

Gold is still trying to digest Wednesday's unexpectedly hawkish Fed statement. Gold is trading at $1,150 per troy ounce and silver at $15.6 per troy ounce, in each case prices are marginally above yesterday's three-week lows. 

Because the Fed is making an interest rate hike contingent mainly on data, the significance of US economic figures has grown accordingly. So far, it has been above all the low rate of inflation that has stopped the Fed from raising interest rates. 

"Consequently, interest is likely to be focused today on the personal consumption expenditure deflator, the Fed's preferred inflation yardstick. It is expected that the core index will have risen by 1.4% year-on-year in October. Any sharper rise would add further fuel to rate hike expectations and weigh on the gold price", says Commerzbank.

According to the Fed Fund Futures, the probability of a rate hike in December is just shy of 50%. The CFTC's data this evening are likely to show how high speculative interest in gold and silver was just prior to the Fed's meeting. 

In view of the price rise in the first half of the week, a further increase in speculative net long positions would not come as a surprise, and the potential for correction would be correspondingly greater.