Gold prices fell as the US Dollar marked higher alongside front-end Treasury bond yields and the priced-in rate hike path implied in Fed Funds futures steepened. Not surprisingly, that undermined the appeal of anti-fiat and non-interest-bearing assets epitomized by the yellow metal. The move almost certainly reflects pre-positioning ahead of the upcoming FOMC monetary policy announcement.

Markets seem palpably worried about acceleration of the tightening cycle. That has been reinforced by a hawkish turn in official rhetoric since newly minted Chair Jerome Powell took office. His early pronouncements from the helm have been echoed even by heretofore committed doves like Governor Lael Brainard, signaling a broader pivot toward more assertive stimulus withdrawal is afoot.

With a rate increase widely expected, updated economic forecasts and Mr Powell’s press conference following the announcement are in focus. The markets are already priced for December’s 2018 Fed outlook but they are 50-75 basis points behind what officials penciled in for 2019-20. An upgrade may open this gap wider while Mr Powell’s confident stance encourages investors to catch up, pressuring gold further.

Crude oil prices pushed higher as OPEC-led producers mulled amending the goals of their coordinated output cut scheme that would prolong the effort. Meanwhile, API reported that US inventories unexpectedly shed 2.74 million barrels last week, clashing with forecasts calling for a 2.54 million barrel inflow to be reported in official EIA statistics due to cross the wires today.

The WTI contract may get a further boost if the government’s report echoes API’s projection. The Fed’s influence is likely to be felt here as well however and may overshadow other considerations. Signaling a pickup in the pace of tightening might weigh against market-wide risk appetite, which could see crude prices following stock markets downward.

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