Fed trumps Trump as dollar, US Treasury yields soar

For now, anyway. Often higher interest rates might be seen as a negative, but indications that the US Federal Reserve Board (Fed) is set to increase interest rates in March only served to drive share prices higher. Fed Chair Yellen has, for example, suggested that ending the reinvestment process would be equivalent to two additional quarter point hikes in the fed funds rate, and add some 15bp to longer-term Treasury yields.

Until recently, markets viewed the possibility of a March rate hike as a low-probability event.

"If we look at gold's performance over the course of the last five trading sessions, prices have hardly dropped at all, telling us that funds remain committed to the precious metal in light of what they view to be an uncertain U.S. legislative outlook", Meir said. Analysts say the central bank is likely to closely scrutinize the monthly jobs data, which will be released on March 10, for any signs the economy is departing from its charted course.

Traders have priced in a 76% chance of a rate hike this month, compared with roughly 30% at the start of the week, according to Thomson Reuters data.

Gold prices dropped on Thursday as the dollar firmed on hawkish comments from US Federal Reserve officials that stoked expectations of a US interest rate hike in March. Policymaker forecasts after the Fed's December 2015 rate hike pointed to four more rate hikes in 2016.


As she did in January, Yellen insisted that the Fed was not behind the curve in raising rates, despite having increased them only twice since the Great Recession ended nearly eight years ago.

She also reiterated that the pace of rate increases is likely to speed up over the next few years. In early 2016, lower than anticipated growth and inflation, as well as a Global events such as the slowdown in the Chinese economy and Britain's exit from the European Union, again encouraged the committee to move more cautiously than anticipated.

KeyCorp and Comerica each rose 1 per cent. "Consumption growth has been encouraging, supported by continued job gains, rising wealth, and greater confidence", Brainard said.

And inflation, which had been lagging at chronically low levels, has been edging steadily up, reflecting in part a rebound in gasoline prices and higher wages.

Sturkenboom said comments about hiking coming from several officials at the same time show that it has been a concerted effort from the Fed to lift expectations in the market. The FOMC likes to see the rate at 2 percent, and although inflation has consistently remained below that threshold, other positive factors have been overcompensating enough to warrant movement of the federal funds rate, in the Fed's estimation.

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