Dollar depreciation unlikely to last

There was a dramatic turnaround in the fortunes of commodities prices this week, with across-the-board gains as risk appetite picked up and the US dollar eased back. Fed Chair, Jerome Powell, was cautious about imminent Fed tapering at the Jackson Hole symposium on Friday, which added to positive investor sentiment. However, we think that an expectation of tighter Fed policy in response to persistently high inflation will push up US yields and boost the US dollar in the coming months, which will weigh on the prices of all commodities, but particularly gold.