Gold slips to three-week low on USA rate expectations

NASDAQ 100 daily chart

NASDAQ 100 daily chart

USA stocks declined on Tuesday after Federal Reserve Chairman Jerome Powell gave an upbeat view on the US economy and said data has strengthened his confidence on inflation.

Powell is taking over the rate-setting FOMC at a time when the world's largest economy may be shifting gear to faster growth and declining unemployment, though inflation remains below the central bank's 2% goal.

In December the Fed predicted three increases in short-term interest rates in 2018, alongside continued reductions in the size of the central bank's multi-trillion dollar balance sheet.

Trump told industry executives Thursday he would impose the tariffs next week.

Rather, "the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in USA exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment", he said.

His comments helped send USA stocks lower (http://www.marketwatch.com/story/us-stock-futures-point-to-a-loss-as-jitters-grow-ahead-of-powell-testimony-2018-02-27), while the dollar and Treasury yields jumped.

West Virginia Teacher Strike Enters Its Seventh Day
In the meantime, school systems are left trying to plan for making up instructional days lost because the state requires 180 days. They said school would resume Thursday, but legislative leaders had not yet confirmed their support for the plan.

Losses in industrial and health care stocks are pulling major US indexes lower in morning trading on Wall Street. "But since then", he said, "what we've seen is incoming data that suggests a strengthening in the economy. The best approach is to deal directly with the people who are affected rather than falling back on tariffs". Policymakers will also issue fresh forecasts that will indicate whether the core of the rate-setting Federal Open Market Committee has shifted its view.

Among the new economic drivers were stimulative fiscal policy and firm demand for USA exports, said Mr Powell.

US consumer prices increased in January as a gauge of underlying inflation posting its largest gain in 12 months, but a survey showed the euro zone's factory boom slowed a little further in February, pressuring euro zone yields lower.

Shares of auto makers and other big consumers of steel and aluminum added to their session losses after Trump said the USA would impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum next week, while shares of US steel and aluminum companies jumped. Eastern Time - comes after he made hawkish comments on Tuesday before a House panel. In another instance Powell noted that rate hikes would not adversely impact wages, "We expected wages to move up amid gradual rate hikes". To questions suggesting the Fed needs to more quickly or dramatically reduce its bond holdings, Powell said, "I like our current plan".

The Fed has signaled three quarter-point rate hikes for 2018 - the first likely to come at the next Fed meeting in March. We've seen continuing strength in the labour market. Earlier this week, he testified before the House Financial Services Committee, where he indicated market volatility won't stop the central bank from raising rates.

The testimony, due at 1500 GMT, will come two days after his hawkish comments ignited fears the Fed could deliver four USA rate rises this year instead of the three already priced in, triggering an equity sell-off and pushing up bond yields. This article is strictly for informational purposes only. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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