The price of gold went for the first weekly decline in five as traders weighed mixed signals from Federal Reserve officials about the size of the next interest rate increase.
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The Fed is considering changing its rate hikes to less aggressive rate hikes, as the market dropped to a three-week low. Policy makers offered differing views, with St. Louis s James Bullard urging another 75 basis-point move, while Kansas City s Esther George struck a more cautious tone, saying the case for rate rises remains strong but the pace is up for debate.
Bullard told the Wall Street Journal in an interview that he favored going big again, arguing that we should continue to move quickly to a level of the policy rate that will put significant downward pressure on inflation. George, who is hosting the Fed's annual policy retreat in Jackson Hole, Wyoming next week, tilted dovish, saying that the policy decisions often operate on a lag, and that the impact had to be monitored. In separate remarks, Minneapolis Fed chief Neel Kashkari said that the central bank has to deal with an inflation problem right now and that we have an inflation problem. As a senior analyst at Kotak Securities Ltd, Madhavi Mehta said that gold may continue to struggle until there are clear signals from the Fed that rate hikes may slow down.
The minutes from the Fed's July meeting released Wednesday showed that officials agreed on the need to dial back the pace of rate increases at some point. This saw traders adjust bets on whether 50, or another 75 basis points, were on the table for the Sept. 20 -- 21 gathering.
There is still a healthy US labor market with jobless claims falling for the first time in three weeks, according to the latest data. The Fed may be able to hike aggressively, though fresh monthly readings on inflation and employment before the September meeting could influence the decision. Spot gold fell by 0.4% to $1,751. 91 an ounce, the lowest level since July 28, was traded at $1,753. This week, prices are down 2.7%. The Bloomberg Dollar Spot Index was up 0.3% after climbing 0.6% in the previous session. All of the silver, platinum and palladium dropped.
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