Gold price lower, clinging to weekly gain ahead of consumer data, Yellen speech

New York (Oct 14)  Gold futures moved lower Friday, though they are still on track for a small weekly gain, as the dollar climbed ahead of U.S. consumer data and an afternoon speech from Federal Reserve chief Janet Yellen.

The metal slogged through its last five trading sessions after last week’s tumble marked the biggest price drop in more than three years. So far, little has emerged this week to sway market expectations for slow, data-driven interest-rate increases by the Fed.

December gold GCZ6, -0.21%  fell $2.60, or 0.2%, to $1,255.00 an ounce. Gold is on track to end the week about 0.3% higher, according to Fact Set data.

Read: A recession is coming — so hide in gold, says influential investor Raoul Pal

First up, financial markets will digest snapshots on U.S. consumer behavior and wholesale inflation data. Retail sales figures for September are expected to rebound from a sluggish August. They’re out at 8:30 Eastern Time, at the same time that the producer price index will be released. A measure of consumer sentiment is due for release at 10 a.m. See the full calendar.

The day’s marquee event, however, could be the Fed chairwoman, who speaks at midday. Yellen will cover “Macroeconomic Research After the Crisis” at a Boston Fed conference.

“It remains to be seen whether she touches on the outlook for policy and whether they might hike interest rates in December,” said Marshall Gittler, head of investment research at FX Primus.

“Following the publication of the FOMC minutes for September, where it appeared that Yellen persuaded the committee to delay hiking, her views are even more crucial than ever,” said Gittler. “I wouldn’t expect anything different than what was revealed in the minutes [but] since they helped to boost the dollar, her comments may do so as well.”

As for those September minutes, several voting members of the policy committee said a rate increase would be needed “relatively soon,” but the committee decided to wait for “further evidence” of continued progress toward full employment and a faster pace of inflation.

The next Fed meeting is scheduled for Nov. 1-2, but expectations for a rate increase at that meeting are slim. Markets have priced in more than a 60% chance for a rate increase at the December meeting, according to Fed funds futures trading.

Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities including gold and silver. The ICE U.S. Dollar Index DXY, +0.32%   which measures the dollar against a half-dozen rivals, rose 0.3% Friday.

A rising-rate climate also tends to push investors out of nonyielding gold into riskier assets. On the other hand, any sign that the Fed is behind the curve in countering flaring inflation with interest-rate hikes and gold could regain some demand as cover from inflation’s corrosive effects on assets.

Meanwhile, December silver SIZ6, +0.24%  rose 4 cents, or 0.3%, to $17.50 an ounce.

Source: MarketWatch