Gold price rises as Yellen looms, but on track for weekly loss
London (Aug 26) Gold futures crawled up from one-month lows Friday but remained on track for a weekly drop as financial markets braced for potential clues on Federal Reserve interest-rate timing when Chairwoman Janet Yellen speaks at the central bank’s Rocky Mountain retreat this morning.
In a speech scheduled for 10 a.m. Eastern, Yellen may signal the Fed is ready to raise interest rates next month, or perhaps at the group’s final meeting of the year in December, after the result of the U.S. presidential election.
“Even though the Fed chief could spend most of her time discussing the implications of a low natural rate of interest and the longer-term future of monetary policy, any comments she makes with regards to the near-term rate path are likely to determine the dollar’s short-term direction,” said Charalambos Pissouros, senior analyst with IronFX Global.
The prospect for higher rates could lift the dollar, depressing the value of precious metals priced in the currency. Plus, a rate increase tends to cut demand for assets that don’t provide a yield, like gold.
“Fed signals regarding the likelihood of a hike this year have been ambiguous lately,” Pissouros added. “The July [Federal Open Market Committee] minutes had a dovish tilt, showing that most members were skeptical to commit to anything until more data validate a rate move. However, key FOMC officials have made relatively hawkish remarks after the release of the minutes, indicating that September remains a live meeting and that markets are underestimating the possibility of a near-term hike.”
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Ahead of the speech, December gold GCZ6, +0.43% inched up $6.10, or 0.5%, to $1,330.80 an ounce. Gold settled at $1,324.60 an ounce on Thursday, the lowest for a most-active contract since July 26, according to FactSet data. At this point, gold is on track to log about a 1.3% weekly drop.
The ICE U.S. Dollar Index DXY, -0.06% was steady at 94.660 Friday, its moves were limited by the trading limbo in place ahead of Yellen’s appearance. U.S. stocks were little changed ahead of the central-bank symposium.
Gold fell and the dollar gained on Thursday in part as at least one Fed member tightened her hawkish-leaning rhetoric. In two separate news interviews, Kansas City Fed President Esther George said a rate increase is warranted, given healthy U.S. data. “When I look at where we are with the job market, when I look at inflation and our forecast for that, I think it’s time to move.” George’s position isn’t new. A voting member of the Fed’s rate-setting committee this year, she had dissented in favor of a rate increase at the panel’s July meeting.
Meanwhile, December silver SIZ6, +0.86% rose 16 cents, or 0.9%, to $18.770 an ounce. Its losses have been sharper than gold this week, leaving the white metal with a nearly 3.6% weekly drop.
Among exchange-traded funds, the SPDR Gold Trust GLD, -0.09% was up 0.3%, while the iShares Silver Trust SLV, +0.06% rose 0.5%. The VanEck Vectors Gold Miners ETF GDX, +1.26% added 0.6%.
See: Here’s why copper is sitting out a big rally by industrial metals
As for industrial metals, December copper HGZ6, +0.34% rose 1 cent, or 0.4%, at $2.09 a pound. October platinum PLV6, +1.15% advanced $11.10, or 1%, to $1,088.10 an ounce. The December palladium contract PAZ6, +1.35% rose $8.45, or 1.2%, to $695.85 an ounce.