Spot gold fell 2.9 per cent to 4,567.23 dollars an ounce and US stock indices closed lower on Friday after Federal Reserve Chairman Kevin Warsh indicated that prices remain the central bank's predominant focus. The two-year US Treasury yield jumped 14 basis points to 4.34 per cent as traders hardened bets on rate hikes.
The US Treasury's daily par yield curve showed the two-year yield rising from 4.20 per cent to 4.34 per cent on 28 August, following Federal Reserve Chair Kevin Warsh's Jackson Hole speech. The ten-year yield moved from 4.52 per cent to 4.59 per cent, narrowing the gap between the two maturities from 32 basis points to 25. The five-year yield rose to 4.48 per cent and the 30-year to 5.21 per cent, concentrating the weight of the move at the front of the curve.[1]
The shift in rate expectations rippled through commodity markets, pushing spot gold down 2.9 per cent to 4,567.23 dollars an ounce by 1744 GMT, its lowest level since 20 August. US gold futures for December delivery also settled 2.9 per cent lower at 4,529.9 dollars. Gold had opened higher before reversing course as traders increased bets on an upcoming rate rise in response to Warsh's remarks on curbing inflation.[3]
Equities followed the bond market's lead, with the S&P 500 falling 19.23 points, or 0.25 per cent, to close at 7,711.76. The Nasdaq Composite dropped 138.93 points, or 0.52 per cent, to 26,402.42, while the Dow Jones finished 9.45 points lower at 53,559.99. Investors spent the session working through the keynote address, which the market read as mildly hawkish for the near term, prompting stock indices to turn lower toward the close.[2]
