XAU / EUR retreats from 14-month highs as aggressive comments from the Fed weigh on gold

• The XAU / EUR has once again traded lateralized in the EUR 1630 area after reaching a 14-month high at the beginning of the session.
• Gold has been weighed heavily in recent trading amid tough vibes from the Fed’s policy makers.

Spot gold denominated in euros (XAU / EUR) It hit new 14-month highs on Friday at 1,653 euros, but has since fallen back to the 1,630-euro zone. On the day, prices are now lateralized compared to those that rise more than 1.0% when they are at highs. However, in the month, the gains in the price of gold denominated in euros are still close to 6.0%.

The pair was boosted early during Friday’s European session amid a surge in Covid-19 fears on the continent after Austria announced it would begin the lockdown on Monday and German officials refused to rule out that they could do the same. . The euro weakened widely as a result and remains the underperforming G10 currency on the day.

But gold prices have weakened widely in recent hours amid what turned out to be a fairly strong rally in short-term US nominal and real yields. The US 5-year TIPS yield rose 8 basis points on Friday, while in recent trading the 2-year nominal yield has eroded previous losses of up to 5 basis points to trade unchanged on the day at around 0.50%.

The bullish movement in yields that has weighed on gold followed a succession of aggressive comments from the Fed. Governor Christopher Waller called for an accelerated reduction in QE, saying that rate hikes could be appropriate as early as the second quarter. 2022. Shortly thereafter, influential FOMC Vice President Richard Clarida said it might be appropriate to discuss an accelerated reduction in QE in December. Many more FOMC members will be connecting next week. Market participants will be eager to assess the Committee’s view of an accelerated reduction in QE and earlier rate hikes.