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Title: Gold, U.S. Yields Rise as Markets Bet on Fed Rate Hikes

Jan 16, 2022 11:41PM ET

By: AnalysisWatch

Gold prices rose in Asia on Monday morning, while US government bond yields rose thanks to aggressive signals from the Federal Reserve. Markets are also starting to price in an earlier-than-expected reduction in the Fed's balance sheet.

Gold futures were up 0.16% to $1,819.40 per ounce at 11:36 p.m. ET (4:36 a.m. GMT), while 10-year US Treasury bond yields remained near two-year highs set the previous week.

In his hearing before the US Senate Banking Committee last week, Fed Chairman Jerome Powell said the US economy was ready for the start of tighter monetary policy. Other Fed officials have also indicated that the central bank will likely raise interest rates in March 2022.

The Fed will make its next monetary policy decision on January 25-26, while the Bank of England will make its decision on February 3.

In the Asia-Pacific region, the Bank of Japan will announce its latest monetary policy decision on Tuesday.

Elsewhere in the region, Chinese data released earlier in the day showed GDP grew 4% year-on-year in the fourth quarter of 2021 and 1.6% quarter-on-quarter. Industrial production grew by 4.3% y-o-y and retail sales by 1.7% y-o-y in December, while the unemployment rate stood at 5.1%.

Surprisingly, the People's Bank of China also cut borrowing costs for medium-term loans for the first time since April 2020.

Meanwhile, physical gold purchases in India declined in the previous week due to rising prices and the number of COVID-19 cases. In China, a major consumer of yellow metal, demand stabilized in view of the upcoming Lunar New Year festival.

Among the other precious metals, silver, platinum, and palladium fell by 0.3%.

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