Hawkish Kaplan may have just signalled a further move down in gold prices

Washington (Mar 23)  Professor Robert Kaplan is president and CEO of the Federal Reserve Bank of Dallas has been on the wires today in an interview with CNBC.

Interestingly he has had his say on the 10-year yield debate that has arguably caused the drop in the price of gold.

In one of the standout quotes, he said he "would not be an advocate of using monetary policy to distort the pricing of the treasury curve and would expect the 10-year yield to back up further from here.". In terms of the timing of the next Fed rate hike, he added that he "expects fed to start raising rates in 2022".

The good news for investors and traders comes as Kaplan said he "expects 6.5% growth and 4.5% unemployment rate this year.". Adding he is an "advocate for scaling back stimulus after he sees real outcomes, not just strong forecasts". Pretty bullish words.

On inflation the Dallas Fed governor said the "base case is to see a temporary surge in prices this year so that inflation will settle down next year" and he then forecasts Y/Y inflation at 2.25% to 2.5% this year.

Recently there has been a decent move in commodities prices but traders and investors have been betting on rate rises in the money markets. If this is to be the bottom in terms of stimulus from the Fed the only way could seem to be up. With rising yields, gold does not seem to be the most attractive proposition at the moment. This comes as long-term investors have not seen much in the way of yields from fixed income in some time. Gold has not reacted too much to these comments but if more Fed members jump on the band wagon the yellow metal could see some pressure. A reminder that we are due to hear from many Fed speakers today including Fed Chair Powell.

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